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Opportunities and Threats: Predictions for 2012

By Steven Miyao

This post by kasina's CEO Steven Miyao first appeared on Ignites, a preeminent source for news about the mutual fund industry.

2011 was a tumultuous year, one that left most industry executives deeply uncertain about the future. The following predictions are meant to provide the industry with ten key insights that should help clarify some of these uncertainties.

Overall Industry Trends:

• Profit margins will slightly decline as a result of sideways markets and increase fee pressure from large distributors. With Europe continuing to grapple with economic upheaval and quite possibly sliding into recession, as well as continued economic challenges in the US, markets will not provide any support for increased margins. A number of distributors, including Morgan Stanley, have started or continued to increase fees for funds distributed through their brokerage platforms. We anticipate this approach from a majority of large broker dealers as they struggle to operate with margins that are less than half of those in the asset management industry. Based on our analysis of publicly available asset managers, kasina predicts that 2012 operating margins will dip from 30.5% to 29%.
• M&A activity will increase as European banks face pressure to raise capital in order to meet the requirements of Basel III. Some European banks with large capital shortfalls -- including Societe Generale, Deutsche Bank, BNP Paribas, UBS, ING, and others -- will likely need to make serious capital divestitures to avoid FSB surcharges. We anticipate that at least three European banks will put their US asset management arms on the auction block in 2012 to raise capital. This will further consolidate assets among the top fund families, but also provide mid size or insurance players to gain the necessary scale to compete in the US market.
• Investors will also replace core U.S. equity mutual funds with equivalent ETF strategies. At least one of the large US players will add ETFs to their product lineup to diversify their offerings. Advisors will continue to be frustrated with active U.S. equity funds, which fail to produce significant alpha to offset higher fees. Core U.S. equity mutual fund strategies will see significant fund outflows (>$35BN) while core U.S. equity ETF strategies will see significant inflows (>$25BN).

Product Trends:

• In 2011, the increased demand for alternative funds was not matched by product development trends. Only 12% of new fund launches were in alternatives. But as distributors (both home offices and advisors) start to demand more products that better mitigate risk or provide higher returns, many more asset managers will make alternatives a major strategic focus. Based on historical trends and heightened demand, we expect alternatives to represent roughly 18% of new fund launches in the coming year.
• Insurers are poised to grow and seek out new business opportunities. In 2012, insurers will focus on restructuring their business and investing heavily in asset management. Insurers will seek out further investments in their asset management businesses (i.e. John Hancock), acquire mutual fund firms from European banks looking to raise capital, and lastly create new forms of guaranteed products in partnerships with asset managers. This means greater competition in the asset management space from firms that are well capitalized and have experience selling to financial intermediaries.

Distribution Strategy Trends:

• Gaining scale in Distribution will be the theme for the year. In 2011, 58% of asset managers and insurers used hybrids. That number will increase to 65% next year as more firms realize that hybrids can, on average, produce over 80% of the gross sales of externals at just 40% of the cost. In addition, we will see at least 15% of firms go beyond a 1 to 1 coverage model by adding internal wholesalers.


• Firms will become more effective through segmentation. Going beyond today's simplistic A-B-C approaches, 8 out of the top 20 asset managers will have sophisticated strategies to segment their advisors. These approaches will be based on a calculation of future value potential to determine WHO to interact with, along with a review of advisor preferences and behavior to determine HOW to interact.

e-Business Trends:

• Traditional wholesaling leaves most advisors untouched. A mid-size firm can typically reach only 5% of the 300,000 US financial advisors. While firms need to segment and prioritize wholesaler interaction to make sure they reach the right 5% of advisors, that still leaves over 286K advisors with valuable potential assets beyond the firm's grasp. In 2012, over a dozen firms will have developed a strategy to use the Web to sell to advisors who are not covered by wholesalers.
• In 2011, 69.9% of financial advisors used mobile devices to access business content, and advisors are spending more time on mobile platforms than ever before. To meet the demand for mobile access and increase productivity, at least 50% of the top 25 asset management firms will rollout tablets to their wholesalers. A few leading firms will join the ranks of JPMorgan to develop enterprise apps for field wholesalers.
• All four wirehouses will announce policies to give advisors access to social media tools in some capacity. Pressure will come from advisors who demand it as a business necessity. Broker/dealers need to stay competitive with what they are offering their advisors. Advisor usage of social technologies is inevitable, and in 2012 we will see the continued adoption of social media as a platform to engage and interact with advisors.

A Look Back at 2011

By Steven Miyao

It's that time of year again, when we look back at our predictions and see how accurate they were. In 2011, I hit 9 of 14. The main challenge in doing predictions is getting the precise timing right, so a number of our predictions from 2011 will pop up again in my forecast for next year. Below, we revisit our 2011 predictions and see what actually transpired.

1. Emerging markets growth continues to outstrip U.S. growth, and U.S. firms start to focus more heavily on international products and clients. We will not only see assets predominantly flow into these categories, but also largely new fund or ETF products come to market in these categories.

Outcome: Asset managers are certainly focused on capitalizing on the growth opportunities presented in emerging markets and internationally-focused funds. In 2011, almost one third of new funds and ETFs were created to focus on emerging markets or international equity strategies. In terms of YTD flows, EM strategies witnessed $19.3BN in inflows, while U.S. equity-focused strategies bled $62.2BN in outflows.

2. Markets will soar next year as corporate profits and the economy improve. Flows will gravitate back to equities from fixed income products as confidence in the economy continues to improve. Late-year concerns over whether governmental fiscal discipline is achievable could hinder the enthusiasm. Interestingly, Year 3 of presidential terms is generally the best year for equity returns.

Outcome: We were on point for the first half of the year: corporate profits improved and reached record levels, and markets surged. We were also right about confidence sagging because of the government’s lack of fiscal discipline, as evidenced by the acrimonious debt battles in Washington and the subsequent downgrading of US debt. But we did not predict that, beginning in the third quarter, European debt woes would have such an impact on markets.

3. M&A activity will increase as firms start to have more confidence in the economy. Foreign as well as domestic powerhouses will make strategic acquisitions to broaden their product offerings. Small to mid-size firms with entrenched brand names or specialized product expertise are attractive targets.

Outcome: M&A activity actually decreased, with total transaction size and average deal premium down. Transactions concentrated more heavily on mid-size asset managers, deals ranging from $500MM to $1000MM. Most transactions were based on strategy initiatives, with only 6 bankruptcy-based deals to date, compared to 18 in 2010. The slowdown in M&A activity was most likely the result of acquirers feeling that relatively high valuations are making acquisitions too risky. We anticipate M&A activity to increase next year.

4. ETFs continue to proliferate, grow and pick up one-third of all mutual fund and ETF flows; ETFs will finally start to gain traction on retirement platforms in a meaningful way. Another top 20 fund family will acquire or start rolling out ETF products.

Outcome: ETFs picked up a whopping 45.9% of total mutual fund and ETF flows. There is limited data available on ETFs in retirement platforms, but a growing (yet still small) number of 401K platforms are opening up to ETFs and we will likely see more in the next year.

5. By mid-year, positive flows into equities will exceed flows into bonds.

Outcome: Equity flows started the year in the positive, outpacing fixed income in the first quarter. But by mid-year, fixed income flows exceeded flows into equity.

6. Assets will continue to consolidate among the top ten fund families. Distributors will increasingly push for the roll-out of exclusive products (branded products only available through a specific distributor) with these preferred partners.

Outcome: While the concentration of assets in the top ten fund families stayed roughly the same in 2011, we continue to believe that consolidation is imminent. Recent announcements from MSSB (as well as likely announcements next year from competitors) will increase distributor revenue sharing and make it more difficult for mid-size asset managers to distribute through large distributors, where the majority of advisors and assets are.

7. National Accounts teams continue to become more prominent, as fewer platforms exist and advisors use fewer providers, and getting on the shelf becomes more vital. Firms will add to their National Accounts teams and will increase compensation for those teams.

Outcome: We were right on point. 96% of asset managers and insurance firms believe the importance of National Accounts teams is increasing. Advisors are using slightly more providers, but getting on the shelf is more vital because more advisors are taking their cues from the home office. National Accounts compensation also increased. 65% of firms are increasing their National Accounts budgets and 73% are boosting staffing.

8. Despite the fact that firms are trying to focus on profitability, most firms will not resist the temptation to staff back up with external wholesalers and ratchet compensation up to pre-recession levels.

Outcome: 81% of firms are planning to increase external wholesaling staff, but economic woes and weak flows have kept compensation relatively flat. Compensation is not quite at pre-recession levels.

9. Several firms invest significantly in segmentation to better differentiate their advisors. These firms will then use this segmentation to direct their wholesalers, website and marketing efforts.

Outcome: Many firms have invested heavily in segmentation to differentiate advisors based on lifetime value, but only a few leading firms have created segmentation strategies to differentiate advisors based on behavioral and interaction preferences. We continue to believe that firms will begin to realize that segmentation is a business necessity, one that enhances profitability and reduces distribution costs.

10. Asset managers will continue to expand their focus on RIAs. 50% of firms will segment coverage of RIAs by AUM. The trend in the industry is increasingly towards segmenting coverage of RIAs by AUM.

Outcome: Our most recent research on the RIA channel shows that 32% of firms with a dedicated team segment coverage by AUM. But 79% of firms target the small pool of mega RIAs, which each manage assets over $1 billion. We expect to see more firms begin to create low-cost strategies to cover the enormous pool of small RIAs, where valuable opportunities exist.

11. Firms look to lower marketing & distribution costs by increased use of the Web as a wholesaler, particularly for lower-AUM clients. A number of firms will set specific website sales goals for advisors who are not covered by a wholesaler.

Outcome: An increasing number of firms are indeed focusing on designing Web strategies with the goal of selling and servicing advisors who are not covered by a wholesaler. We will likely see continued developments in this area in 2012.

12. Social media will continue to become more relevant to engage with investors, advisors, and institutional clients. Over 50 investment management firms will be on twitter next year.

Outcome: This has certainly been the case. Our latest count puts the number of investment management and insurance companies on twitter at exactly 50. Leading firms are integrating their social media efforts with the Web using a live twitter stream.

13. Mobile efforts will expand greatly; apps start to attain dominance over site optimization for Web. Ultimately, there will be competition in the apps space and "app overload", but not short term. We will see enhanced mobile support beyond the mWholesaler platform. Over 35% of firms will roll out tablets to their wholesalers.

Outcome: Many of the large firms have rolled out tablets to their wholesalers. Mobile efforts are expanding with some firms developing apps, but app development is still in its infancy. We are already beginning to see enhanced mobile support beyond the mWholesaler platform. JPMorgan has developed an enterprise app for wholesalers and a number of firms are currently in the developmental stages. Expect to see continued mobile efforts in 2012.

14. We will see many firms make the investment in more intelligent tracking/analytics to better understand their Web traffic.

Outcome: There has been more talk than action on this front. Some leading firms have integrated key systems like CRM, CMS, and Web usage, but most firms are still dragging their heels and putting off the investment until the future.

What I Learned from Asset Management Conference Season

By Lee Kowarski

Between Labor Day and Thanksgiving, it seems like every organization in the asset management and insurance industries hosts a conference. Between FundForum USA, IRI, MFWire, MMI, NICSA, kasina's own Distribution Summit and e-Business Roundtable, and many more events, the amount of information can be overwhelming. Here are three key themes I observed throughout conference season:

• Compensation is Changing - For the first time, I heard CEOs talking publicly about the need for changes in how wholesalers are compensated. The inherent flaws in compensating purely on gross sales is nothing new, but this Fall marked the first time that senior executives openly discussed the need to evolve compensation models to pay on net sales (or a proxy) and activity metrics in addition to gross sales.
• Increased Focus of the Home Office - Industry conferences used to focus almost exclusively on discussions of product and wholesaling. This year, nearly every conference had multiple sessions focused on the ever-increasing role of research analysts at the major distributors and how asset managers and insurers can best support their needs. Firms are recognizing that, as our research shows, 62% of advisors' AUM are already influenced by the home office and this figure will increase to 77% by 2015. This will require firms to rethink, and to invest in, their National Accounts teams.
• The Importance of Digital - While I will never get used to hearing the word "tweet" coming out of senior executives mouths, it is gratifying to hear so many industry leaders talking about the importance of digital strategies to their organization. From websites to social media efforts to mobile initiatives, marketing is taking on a larger role in organizations and is increasingly becoming digital.

Now off to enjoy a quick break from the conferences for Thanksgiving and then it's time to get ready for kasina's sold out National Accounts Roundtable next week!

Occupy Wall Street - Helping America Recapture The Dream

By Steven Miyao

For many people, the demonstrators on Wall Street are little more than a noisy scrum of perpetual malcontents who predictably rail against capitalism and bask in the opportunity to create havoc. And in many respects, that's exactly who they are.

But they are also tapping into a deep vein of frustration and distrust that the asset management industry needs to address. Sure, the recession officially ended in the summer of 2009, but a large segment of the population has yet to see recovery and feels disenfranchised. They are watching the American dream slip away. The asset management industry is the mechanism through which millions of Americans achieve their financial goals, so the industry has to empathize with - and come through for - its investors. It is our role to help them recapture that dream.

When I was asked to write this article about Occupy Wall Street, I (like most of the country) had only been following it in the media. I felt that in order to articulate an informed opinion, I had to go down there and see the spectacle for myself. I have to admit, I was truly underwhelmed. I did not encounter the huge crowd that I had expected. It was more of a media event than an actual protest. There were just as many bystanders and journalist as protesters.

But amid the students with too much time on their hands and the anti-globalization radicals waiting for the next G8 meeting to storm, there were what you might call "regular "people, who have jobs, and children, and 401(k)s, too.

Even if the people at Zuccatti Park are just an expression of the growing discontent among a large segment of the population. They remind us that unemployment is historically high and the housing market looks like it won't be rebounding - much less emulating its former self - anytime soon.

The unemployment rate is still 9.1%, not much lower than it was in 1982, the year with the worst unemployment rate in the last 70 years, according to the Department of Labor. Clearly, what makes matters worse is that the real unemployment rate, including those unemployed and those employed part-time but looking for full-time work, remains around 19%.

A recent Pew survey showed that the number of Americans who believe their kids will have a higher standard of living than they do dropped from 62% in 2009 to 47% now. As for themselves, only a little more than half of people (56%) believe they are better off financially than their parents were at their age, the lowest percentage since the question was first asked in 1981.

Our industry's customers are the general public, regular folks associated with pension funds - like the New York City Fire Department Pension Fund or the UMWA Health and Retirement Funds. They are the 90.2 million Americans who own mutual funds, either directly or through a 401(k) or another defined contribution account.

Since the industry's job is to help Americans reach their financial goals - buy a house, send their kids to college, retire at a reasonable age - it needs to communicate that it is on the investor's side, and that it will work hard to evolve its products to better serve its clients.

What Should Asset Managers Do?

Asset Managers should participate in the debates on issues shaping the country's financial future and work with legislators on retirement reform and financial regulation. Firms also need to educate:

• The general public on financial literacy and the role of defined contribution plans - T. Rowe Price, for example, has a comprehensive financial literacy program including an online game that they developed with Disney http://piggybank.disney.go.com/media/ap/piggybank/index.html
• Washington on retirement income and financial reform- Putnam Investment's Bob Reynolds has a blog that focuses on the country's retirement savings challenge http://www.theretirementsavingschallenge.com/

Firms have to frame their solutions to address the current concerns of investors and advisors, and must evolve their products beyond the traditional asset classes into products that limit volatility or provide returns that are not correlated with the market. kasina's research also shows that distributors are increasingly looking to partner with product manufacturers who offer ways of mitigating risk. This could be the beginning of a paradigm shift in the asset management industry, with lasting repercussions.

A number of firms have developed products or solutions that address the concerns of advisors and investors. Natixis Global Associates markets the concept of "durable" investment portfolios by incorporating products like absolute return, hedged and emerging markets. Their Web site features articles and videos by their portfolio teams explaining how to manage risk and volatility.

The asset management industry has a great opportunity to address the concerns of today's investors and to side with its customers. The industry can achieve this by using its expertise to shape the agenda in Washington, educate the public on financial literacy, and by providing investment solutions that enable Americans to fulfill their financial ambition.

Steve Jobs' Legacy

By Lee Kowarski

The best compliment that I ever received about kasina was when a client described us as "the Apple of the asset management industry" because of our focus on innovation, our understanding of technology's impact, and our ability to "think differently". Today, as the world mourns the loss of Steve Jobs, I find myself feeling the loss more than I would have expected for someone that I never met. Rather than try to sum up what Steve Jobs meant to me, our company, or the industry, I thought I would simply share four quotations that have inspired me, a video, and two excellent tributes:

• "Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma - which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice." - Commencement speech at Stanford University, 2005
• "That's been one of my mantras - focus and simplicity. Simple can be harder than complex: you have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains."- Interview with Business Week, 1998
• "Being the richest man in the cemetery doesn't matter to me... Going to bed at night saying we've done something wonderful... that's what matters to me." - Interview with Wall Street Journal, 1993
• "It's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them." - BusinessWeek interview, May 1998
• Video of Steve Jobs introducing the Macintosh in 1984: http://www.youtube.com/watch?v=2B-XwPjn9YY
• Gizmodo's tribute: http://gizmodo.com/5838922/the-steve-jobs-think-different-tribute-video
• Wired's tribute: www.wired.com/epicenter/2011/10/jobs/

RIP, Steve - you will continue to inspire us all for many years to come.

*Sent from my iPad

The Tax Deal and What it Means for Asset Management Firms

By Eric Daugherty

Despite an uprising among House Democrats, it appears clear that the $858-billion package of tax cuts and jobless benefits that President Obama and Republican leaders crafted will pass Congress without major changes. What is less clear is what the deal could mean for the asset management industry.

With that in mind, I took a look at key provisions of the proposal, and concluded the following:

Short-term (next 2 years): Maintaining lower income & capital gains rates and reducing the employee portion of payroll taxes will put more cash in spenders' or investors' pockets. Allowing businesses to expense 100% of their investments in 2011 will stimulate business spending. Collectively, the deal will be mildly stimulative, propping up economic growth, spending, and asset levels. Additionally, since markets love certainty and the deal is the first sign we have seen in a while that Congress and the president can get to compromise on economic details, expect to see happy equity returns short-term.

Long-term (over 2 years): Short-term stimulus spending has to get paid for eventually. This deal just adds to current projected deficits. Eventually, this will get paid for by some combination of:
1. Generating surpluses (don't bet on it) based on economic growth
2. Major spending cuts, probably including military and entitlements (politically difficult)
3. Printing money (leading to inflation)
4. Higher tax revenues generated by higher tax rates, simplification, or elimination of write-offs

Absent a decisive move to rein in deficits in the next few years, our current fiscal situation must lead to lower economic growth long-term, higher inflation, higher interest rates, higher tax rates, and interest payments crowding out other spending. In asset management, this means that inflation-protected and tax-managed products will become more attractive. Income sufficiency, retirement planning, and downside protection will also continue to be front of mind in the next decade.

Source: msnbcmedia

To summarize potential impacts differently, think about this - legislation can impact firms in a finite number of ways:

• General impact on the economy, which spurs investments, cash flows, etc. - this will be the foremost impact of the current deal on asset managers. The deal and subsequent stabilization, emotional uplift, and retention of lower rates will have a favorable impact on asset prices and flows into investment products in the short-term.


• Favoring certain products or behaviors over others - the only product impacts I envision are that the bill makes two things more attractive than they would be if there were no deal: high-dividend stocks (since the lower 15% rate is retained; and selling/rebalancing investments, as 15% capital gains rate makes for less frictional cost to sell.


• As an employer of labor - the current tax deal will have only minor impact on asset managers as employers.

In summary, the impact of the tax deal on asset management will be minimal. The certainty and minor stimulus provided will help buoy markets and flows in the short-term by keeping more money in the pockets of investors. Longer-term, the deficits and concern over controlling them must lead to inflation, higher interest rates and suppressed growth. As with other fiscal moves throughout the recent recession, this deal pays for the present with the future.

A Look Back at 2010

By Steven Miyao

A year ago we took a run at predictions for 2010. I will briefly review our predictions.

Recap of 2010 - How right were we last year?

Industry trends:
1. Bond flows continue to dominate (>70% of flows) early in the year. Flows into equities dominate (>70% of total) the 2nd half of the year, after definitive data says the economy is improving. Continuing a long-standing trend, investor flows follow performance. Strong equity flows replace bond flows after the stock market surges and after interest rates start to rise and bond prices fall.
Conclusion: Half right, half wrong

Bonds flows dominated throughout the year.

Equity market surged, fell, and surged again.
Source: Yahoo Finance

Interest rates went lower still.
Source: SmartMoney.com yield comparison tool

Bond prices continued to rise.

Through November, flows into bond funds amounted to $245B (of a total of $250B of long-term flows). Even PIMCO's Total Return had its first month of outflows since November 2008. We'll take credit for being partially right on this one.

2. Net flows continue to go predominantly to low fee shops, as the miniscule total returns of the past 10 years magnify the importance of fees. Those shops without low fees only draw net flows if their products are truly differentiated.

Source: Morningstar

Result: We were right, as Vanguard and PIMCO dominated flows.

3. From a trough of 18% in the 1st quarter of 2009, gross profit margins for firms climb back above 30% again (2008 margins were 30% for publicly traded asset managers). The ultimate winners will be those who maintain their focus and fiscal discipline even after assets recover, setting themselves up for sustained, intelligent growth.

Result: Operating margins are back in the high 20's, not quite to 30%. TRowe, Calamos, Gamco, Pzena all stay ahead of the pack, with operating margins over 35%, driven by focused growth and disciplined expense management.

Source: kasina

Strategy & product:
4. M&A picks up, in number if not in dollar terms. Firms have shored up balance sheets. Those in the best financial shape look to acquire, in order to expand international presence, shore up product gaps, bring on an attractive brand name, and gain scale. Small-to mid-size firms with entrenched brand names or specialized product expertise are attractive targets. While we don't expect to see deals of the size of Merrill/B of A, expect to see a handful of mid-size household names change hands.
Result: We have not seen much of a pickup yet. Due to the sluggish recovery, potential acquirers are being cautious with their cash.

5. Guaranteed income products become hot, both in and out of retirement plans (albeit hotter in retirement plans than outside). Limiting downside risk in portfolios continues as a focus for retail and institutional investors.
Result: More talk than action still. Alternatives such as absolute return products seem to be off of the black list, but traditional guaranteed income products are not capturing drastically increased flows yet.

6. ETFs continue to proliferate and gain market share. Advisors continue to gravitate clients from open-end funds to ETFs as advisors understand how to optimize usage of ETFs and firms continue plug product lineup holes with all possible flavors of ETFs.
Result: We got this one right. And, this trend is likely to continue for the next few years, as ETFs pick up market share from funds.

Distribution:
7. Compensation of wholesalers continues to recover. Average total compensation for external wholesalers, which was $372,000 in 2007 and dropped to $295,000 in 2008, fully recovers to 2007 levels. While an ample supply of talent looking for work should suppress wages, firms' healthier financial positions, their desire to take care of their best performers, and renewed positive net flows put upward pressure on total compensation.
Result: Actually, firms have been fairly cautious with compensation. External Wholesaler compensation, for example, is forecasted to stay flat from 2009 to 2010.

8. Ten of the top 20 firms in assets have hybrid wholesalers by the end of 2010. The cost-effectiveness of hybrids is being proven by the early adopters. Additionally, advisors indicate more willingness to deal remotely and less time to meet face-to-face, both of which point towards' internals and hybrids gaining in importance.
Result: There continues to be slow adoption of hybrids. By our count, eight of the top 20 firms currently employ hybrids. As to the second point in our prediction, advisor data continues to indicate a growing preference for online and remote support. Therefore, internals and hybrids will continue to be effective in serving these advisors, as will online marketing and support.

9. Firms continue to leverage technology by experimenting with video, audio, and web conferencing capabilities to deliver 1-to-1 (wholesaler-to-advisor) and 1-to-many (interactive Q&A with in-house experts) interactions.
Result: Yes on the video and audio fronts, but we haven't heard much regarding conferencing yet.

e-Business:
10. Social media becomes mainstream in financial services, but firms' levels of commitment are varied, some diving in with both feet, some much more cautiously. Progressive firms experiment with different media in both B-to-B and B-to-C arenas. By year-end, 18 of the top 20 firms in assets have dedicated pieces of their budgets to social media.
Result: We have seen an increase in firms who claim to have a social media strategy and who are dedicating resources to social media.

11. Firms begin to move away from considering their Web sites as the central repository of content and towards supporting broader distributed content (e.g. SlideShare, Scribd). As print costs skyrocket, advisor only content becomes passe, and people are free to distribute content anyway, firms will decide to make this as easy as possible by making their content portable and omnipresent. One major firm takes the leap, and spends as much on managing and facilitating data and content in the "distributed arena" as they do on their own Web site.
Result: Both mobile technology and social media are driving firms to release their hold on content.

All in all, it was a mixed bag for us-some right, some wrong. But the fun is in the prediction, discussion, and (re)evaluation.

Upon reflection, the most significant happenings we saw in 2010 included the following:

Industry trends:

• Markets stabilizing. Equities posted a gain but unemployment still remains high. Asset management companies are also dealing with pressures to reduce costs.


• 12b-1 fee proposals. Lots of possible change from regulators, not much came to fruition yet.


• An undercurrent of fiduciary sentiment pulling towards a clear standard.

Strategy & product:

• ETFs gaining huge momentum.


• The beginning of a large transition to retirement income.


• Asset managers are trying to survive and be cautious on their budgets.

Distribution:

• Refinement of compensation models to better match firm profitability.


• Increase in importance of targeting and measuring sales and marketing strategies.


• Segmentation is starting to be taken seriously-sales is developing more respect for data/analytics (it's not just about relationships).

e-Business:

• Increased buzz and action around mobile technologies and smartphone user interfaces.


• Firms are getting a lot more serious about technology and promoting their point of view through their Web site/blogs, etc.


• Social media and shareability of content continue to proliferate.

Big Themes from Morningstar's Advisor Conference

By Deb Wetherbee

The Morningstar conference last week was a great place to observe wholesalers with advisors, see what products and vehicles advisors are looking for from asset managers, and glimpse a bit into the future. There were a number of good speakers, including some industry celebrities - although none of the post-speaker lines were quite as long as last year's wait for a Bill Gross photo. As I listened to the different analysts, portfolio managers and CEO's, a few things stood out for me:

• The panel of Morningstar analysts suggested that they would soon be segmented by passive vs. active instead of ETF, Fixed Income, Equity, and Global.


• The flows to fixed income are becoming an ever increasing industry concern.


• ETF's - Vanguard rolling out low-cost index ETF's and Grail, at the other end of the spectrum, rolling out a few more active, sub-advised ETF's.

There was a great deal of talk about advisors as fiduciaries, and the fact that investing is becoming more complicated (particularly with retirement income needs increasing). While I do believe this is all very true, it is interesting that the individual product structures are getting less complicated and assets are continuing to go to passive products. Interesting...

Many sessions addressed diversification and rebalancing due to the continued inflows to fixed income products. With the markets of 2008 still fresh in investor's minds and the increasing number of boomers reaching retirement, fixed income was bound to benefit. But, at this point, investors have missed out on equity markets. As one portfolio manager put it, the volatility seems worse because we are in the middle of it. When you step back and look at the Ibbotson charts over decades, the volatility doesn't appear so intense. It is critical to keep to your diversified portfolio and rebalance it, therefore making your advisor extremely valuable.

And ETF's were everywhere, from exhibit hall booths to sessions, to press announcements during the event. It seems as though the vehicle no longer matters, you can now get almost every investment strategy in almost every vehicle.

Perhaps it is difficult to manage your money. While the individual products have become simpler and the fees more transparent, designing, monitoring and maintaining the appropriate portfolio mix is that much more complicated. Add in the need to plan withdrawals during retirement and it is easy to understand why the majority of flows in our industry come through the intermediary channel.

Again, the conference is a great place to understand what advisors are looking for, or at least how they interact with your sales staff, get access to a few gatekeepers and take in trends on the investment management side. I look forward to watching further product development and education to get investors diversified and, of course, to see if Morningstar restructures the analysts by active vs. passive disciplines going forward.

Are these new-fangled technologies for me?

By Rubesh Jacobs

Social media is all the rage. Conversations about how to leverage technologies such as webcasts, webinars, YouTube channels, podcasts, blogs, Slideshare, LinkedIn, Facebook, Twitter, ad infinitum are probably going on all around you. With an eye towards managing their brands, engaging their clients, and enhancing their reputations as innovative brands, firms such as Vanguard, Putnam, and TIAA-CREF are experimenting with at least one of these ground-breaking technologies.

In fact, kasina is notorious for engaging its clients in discourse about how best to use these technologies to improve sales, marketing, and services.

However, we sometimes recommend firms delay these investments in favor of focusing on essential online services instead.

Would it not appear irrational were a firm whose Web site barely allows searching and sorting product performance information to place prominence on video updates from their chief economist? What about tweeting when your last thought leadership piece is a month old? Or spend an inordinate amount of resources on business-building tools for advisors when the advisors complain about remembering their passwords? The scenarios are endless...

The root causes are somewhere in the organizational structure, culture, strategic planning process, etc. Rarely is it a result of lack of competency, creativity, or savvy. Many firms that are experimenting with social media now have spent years getting the basics right.

So, if you are considering the use of these new technologies, I urge you to first consider the following:

1. Are your customers' basic, most important needs fulfilled now? If the answer is not a resounding "YES," then examine what you can improve.
2. Have you built support for your idea around the organization for the investments in new technologies? If you can't convince yourself that you have, then you need more time.
3. Can you articulate why some of these technologies make sense for your business? The answer should at least make sense to start a serious, fact-based discussion.

Don't let me dampen your spirits. The message here is this: be prudent about where you place your bets. The next big thing is not always the best thing for your business.

kasina Announces New Principal

By Steven Miyao

I am happy to announce that Eric Daugherty, our Resident Intellect and Director of Research, will be joining me and Lee Kowarski as a kasina Principal.

Eric has made a decisive impact on the quality of research and thought leadership at kasina over this last year, has been instrumental in growing our overall business, and has essentially operated as a Principal for the last four months. This announcement merely formalizes his position.

As part of the kasina leadership team, Eric will collaborate with the other principals on kasina's short and long term strategy, as well as the continued mission of kasina to innovate distribution in financial services. He will have specific P&L responsibilities, as well as increased community service goals.

Our clients will further benefit from his tremendous 15 years of hands-on experience in business unit leadership in financial advice services, strategic planning, and financial analysis. Previously, he was a Principal at The Vanguard Group, most recently leading their Retail Advice Services Group. Prior to Vanguard, Eric performed economic analyses for Amoco Exploration & Production, and started his career with five years of international tax work with Price Waterhouse.

Eric will continue to help the kasina Youth Foundation. He has a passion for improving financial literacy among students and young adults. He serves as Treasurer and Secretary of the Foundation and is also involved with Cents-Ability, Junior Achievement, and the Financial Planning Association of Philadelphia Pro Bono committee.

I'm very excited that he is now an official member of the kasina leadership team

Farewell My Friend

By Steven Miyao

I wanted to take this opportunity to thank Mike Ma for eight and a half amazing years. I am writing this blog with both sadness and excitement in regards to his and our future. As you might have seen from his last blog post, Mike has decided to take a new challenge starting next month.

I know this is going to be an excellent professional step that will offer new opportunities for Mike. He has been a tremendous asset to kasina and I know his new team will also benefit from his enthusiasm and insights.

Mike is leaving during a period of tremendous growth for kasina. We will miss him dearly, but if there ever is a good time, now might be it. While replacing Mike's skill sets won't be easy, our hiring of talent over the last year will allow us to transition his responsibilities seamlessly.

kasina has always believed in aligning our employees' goals with those of our organization. At times, an individual may have ambitions that can't be reconciled with those of the company. When we encounter such a situation, we encourage and help our employees to find new paths. The time has come for Mike to do just that, and I am excited for him.

I am also sad to see him go, because I won't be able to chat with him every day about the future of our industry, music, and life in general. Still, I know that while I am losing a great business partner, I will continue to have an amazing friend.

Thank you, Mike, for everything that you have done for kasina.

My Last Blog Post: A Grateful Goodbye

By Mike Ma

It is tough for me to say this but ... I am leaving kasina.

After 8 and a half wonderful years, I am heading off to pursue a new chapter of my career. So, I wanted to take this final blog post and say a brief thank you to a number of people who have made such an important impact on my life.

First, I wanted to thank Steven and Lee for starting kasina, bringing me on, and investing so much in my development. It is truly a special place and I consider it an immense honor to have worked here. You both have shaped my views on work and life in general by never being satisfied with how things are and always offering ways to get better. This is true whether we were working on a client project, starting the kasina Youth Foundation, writing the next great report, or talking about how we grow the firm. Clients should know we built the firm to a better place than I found it and I know the changes we have been making will continue to benefit the industry and kasinians for well beyond the next 10 years.

More importantly, I also want to thank you for the family-oriented culture you've built. Though we braved one disaster, three market cycles, dozens of reports, hundreds of projects together, I will always remember you both and kasina more for supporting me through my marriage and the arrival of Sean, Elizabeth, and Jack. As such, you will always be a part of the O'Connor-Ma family.

Second, I want to thank the rest of the kasina team -- what an outstanding group of people. I will miss you all dearly. Andy, thanks for debating every issue with me in the name of understanding. Betsy, thank you for taking such good care of me and my family. Deb, you've taught me so much about the power of authentic relationships. Drew and Rubesh, your enthusiasm has left an indellible mark on me in our short time together. Eric, you always pushed me to strive for the next level of professionalism and sophistication. Julia, thank you for continuing to push us to be the most open firm we can be. Mariel, Jess and Eliz, thank you for, quite frankly, making order of out of the chaos that is my life.

Third, I wanted to thank kasina's clients and partners. Thank you for continuing to challenge me and my thinking and letting me in to work with you and your firms. I have grown so found of all of you both personally and professionally. Moreover, you inspire me. As consultants and researchers, we have the easy job making the recommendation. It is you who actually have to go out and do it. As I join your ranks, I hope to live up to half of what you have shown me. I leave you in more than capable hands with the team at kasina, as I plan on joining you as those who will benefit from their advice and insight.

With a bittersweet heart, I say farewell. I will leave you a thought of a friend to whom I had to say a tough goodbye. He said, "Life is long, and the list of those who inspire me is short. So I am certain that we we will see each other again soon."

Thank you all.

The Need for Education - Proving That We Are Not All Evil

By Lee Kowarski

This past weekend, the Wall Street Journal wrote an article that, among other things, encouraged investors to "be wary of investing in something you don't understand." I completely agree with this principle, but the challenge here is that most people in our country - including most investors - don't truly understand mutual funds and other "simple" investment vehicles. In fact, the vast majority of people in the U.S. don't understand most aspects of our financial system - from basic concepts such as budgeting, to more complex issues such as credit cards and investing.

The kasina Youth Foundation and its partner, Cents-Ability, have been focused on improving financial literacy in our country for years, but the difficulty of this task is only being exacerbated by the many common misconceptions in the marketplace. Everywhere people look, they read about Goldman Sachs, bailouts, and other issues that confuse them and (rightfully or wrongfully) cause them to second guess the financial institutions that - for the most part - are working diligently to create affordable products that will enable their customers' financial security. With the mainstream media generally on the attack, our industry is doing little to combat the perception that all financial services companies are evil.

Since most asset management firms are focused on intermediary distribution, they have decided not to invest much into directly educating shareholders. It is critical, however, for asset managers to recognize that they are being lumped in with the negative perception of financial services firms and must therefore increase shareholder-focused educational efforts (directly to shareholders, through financial advisors, and through third-parties such as non-profits, trade associations, etc.) and increase transparency (about how products are run, how their firm makes money, etc...). Asset managers must confront this issue head on or risk not only losing business to competitors, but losing potential investors to inaction. Firms should go on the offensive with increased direct communications, as well as by arming financial advisors with content aimed to overcome the negative perceptions that are so common today.

Should Schools Bribe Kids? Should Asset Managers Bribe Better?

by Mike Ma

I know I am on this purpose and mastery-driven compensation kick in the last few months month, but it's everywhere I look. Time's cover story this month, "Should Kids Be Bribed to Do Well in School?" has a lot of interesting implications for our industry.

They cover the controversial work of Roland Fryer, a Harvard economist, who is testing the effects of paying kids for school performance.

Fryer ran different experiments in paying kids to learn across the in 4 cities. The results are summarized in this graphic:

While I don't want to start a policy debate (Fryer himself has received death threats), it is very interesting to note that the classes in Dallas and Washington had more favorable results. For instance, the Dallas kids had reading scores that went up by .4 standard deviations, the equivalent of 5 extra months of schooling. Why? Because they are incentivizing behaviors, not results.

Kids may respond better to rewards for specific actions because there is less risk of failure. They can control their attendance; they cannot necessarily control their test scores. The key, then, may be to teach kids to control more overall -- to encourage them to act as if they can indeed control everything, and reward that effort above and beyond the actual outcome.

Or this nugget form says Joshua Zoia, who founded the much publicized KIPP Academy:

Our ultimate goal is to get kids to be intrinsically motivated. But we have to get kids hooked in. We have to meet them where they are.

In short, what if we substitute the word "kids" with "employees," can we learn something? Could we do something different in our compensation plans this year or next? To paraphrase Dan Pink, it's scary sometimes to look at what social science knows, and business ignores.

Please feel free to call/write to discuss!

Another Important Reason for Asset Managers to Cultivate a Presence Online

by Drew Maniglia

As a part of my work on FA Vision, I have recently had an opportunity to look back at the "What Advisors Do Online" survey from 2009. I came across some interesting insights that help put to bed the commonly held belief that those advisors who frequent the Web represent a lower value group. This is a notion that I had heard questioned in several conversations, and I wanted to see if it was true.

In 2009, kasina conducted its "What Advisors Do Online" survey and the respondents had AUM ranging from $1MM to $5 BN, with the overall sample average at $120 MM AUM. The one hundred advisors with the most assets under management (the top quintile by AUM) had an average of $443 MM AUM. Trends focusing on these top one hundred advisors reveal that top producing advisors are indeed frequenting the Web to the same, and in some cases to a greater extent than the average advisor. Of these one hundred top producers, 45% reported visiting LinkedIn, and 42% claimed to use YouTube. In addition to these social media sites, top value advisors are also visiting industry specific sites like Morningstar, Ignites, and asset managers' sites - of the top 100 advisors, 75% visit asset managers' public Web sites, and 91% visit asset managers' advisor Websites. Furthermore, advisors who visit Morningstar.com on a daily basis have average AUM over 90% higher than those who visit the site with less frequency. All of this suggests that high level advisors are quite active on the internet.

I think this is useful for asset managers to internalize. Asset managers have access to a valuable cross section of clients and prospects online, so there should be a strong incentive to focus on Web strategy and cultivate a presence everywhere from LinkedIn to standard industry sites. In doing so, firms will be reaching out to some very worthwhile advisors.

Hot Job Of The Future: National Accounts Manager

by Eric Daugherty

Increasingly, National Accounts Managers (NAMs) are the ones responsible for generating big opportunities for asset management firms. We just published Excellence in Distribution: National Accounts, a study that discusses the rise in importance of National Accounts teams. It's not hard to understand why they are gaining prominence.

Distributors continue to consolidate. Bank of America acquired Merrill Lynch, Morgan Stanley and Smith Barney merged, and Wells Fargo took over Wachovia. On any given platform, there is only finite space for investment products. So, as distributors consolidate, there is a natural rationalization of products. For asset managers, this is a huge risk, and a huge opportunity. While the office to office wholesaling to individual advisors (or teams of advisors) still has to happen, more and more of the huge battles are being for fought for platform placements. This makes the role of National Accounts Manager vital.

More than ever, National Accounts Managers need to be polymaths - adept at multiple functions. They need to be relationship builders and astute strategists when dealing with the distributors, and agile gatherers of resources within their own firms. They need to insure clear and ample communications to multiple parties, and to identify opportunities to marry their firm's products with a distributor's needs. They also need to be technical enough to talk product attributes with research analysts. As you can imagine, finding the right person for the role is of paramount importance.

However, there are other key findings in our report that firms need adopt. Specifically, they need to focus on fewer distribution partners. The landscape of distribution is changing, and dispersing efforts across too many focus firms will just limit chances for success. Firms should be measuring the profitability of each distribution relationship that they have (P&L example below).

Additionally, firms need to insure that the goals and incentives of Sales and National Accounts are aligned. National Accounts drives how product gets placed on platforms. Sales drives how much product gets bought off of those platforms. Clearly, neither of those can be optimized without the other.

Lastly, firms need to put more resources behind National Accounts. Curiously, while 92% of firms expect National Accounts to become more important at their firms, only 68% expect staffing increases, and 48% anticipate budget increases. With fewer, but bigger, opportunities available, those firms who recognize the importance of resourcing National Accounts appropriately, and staffing it with the best and brightest they can find, will win the most profitable placements.

Long term winners in distribution will be those firms who figure out how 1+ 1 >2, how Sales plus a stellar National Accounts team can drive better partnerships, more valuable platform placements, and greater sales. In the meantime, expect to see a big focus on National Accounts Manager hiring and development.

4th Quarter Margins Flatline, but Closer Look Shows Most Asset Managers Continue to Recover

by Eric Daugherty

A few months back, I portended an earnings rebound for asset managers, and the 3rd quarter seemed to bear that out. Now that 4th quarter earnings are in for all the publicly traded asset managers, what do they tell us about the state of the industry?

S&P 500 Level

With a backdrop of largely rising markets (see level of the S&P above), the universe of publicly-traded asset managers collectively managed margins that were only equal to the third quarter. And, full-year 2009 margins still fall well short of 2008 margins.

However, a closer firm-by-firm look shows that most companies' margins bottomed out in the first quarter and continue to recover. This chart show operating margins for all fourteen publicly-traded firms.

Aside from a few aberrations, firms continue to improve their margins as the market environment improves. The few exceptions are Alliance Bernstein (taking a step back this quarter), BlackRock (which incorporates massive BGI figures for the first time), and Legg Mason, Waddell & Reed, and Invesco, who continue to trail the pack. Legg Mason and Alliance Bernstein were the only firms to see assets under management decline in the quarter.

Looking forward, I amend my prior forecast. Previously, I thought that rising markets and aggressive cost-cutting would lead to margin bonanzas. However, recent market events and financial figures lead me to believe that markets will hold steady and the industry will not continue its rationalization of costs and structure. Even if there is a "new normal" per Bill Gross, of lower growth and suppressed asset returns, the pain is too recent and rationalization is too hard to continue unless crisis demands it. A few aggressive opportunists will continue the hard work; everyone else will take a deep breath.

Firms need to continue to focus on rationalizing their structures. The threat of another downturn remains. In addition, regulation, industry maturation, and increasing consumer focus on fees portend eventual margin compression. Firms that prepare now will be set to thrive in an increasingly competitive future - in particular, smarter distribution, use of the web to drive marketing and efficiency, and leveraging emerging channels like social media will increase asset managers' ability to preserve healthy margins as long as possible.

Asset Managers Go for the Gold; Seasoned National Accounts Managers Can Get Them There

by Deb Wetherbee

Listening to my two sons, 4 and 6, relive every moment of the 2010 Winter Olympics is fascinating. They don't differentiate among the various sports and perceive the US athletes as a single team. While this is true in one sense, as adults we tend to focus more on the individual effort necessary to win THE Gold in different sports. For years, financial service firms have treated the external wholesaler as the "elite athlete", the key to advisor relationships and assets, aka THE Gold. At the same time, we have been talking about the greater influence that home offices exert on advisor business. While wholesalers will remain key players, the National Accounts Manager is moving to the head of the team.

Our FA Vision survey results confirm the trend toward home office decision-making. Our most recent survey shows that advisors put 21.6% of their overall production in mutual fund wrap platforms and 33.5% of their mutual fund business in products on the recommended lists. Both of these figures are trending up from the May 2009 results. With our May 2010 survey just around the corner, we will continue to monitor this trend. Advisors also anticipate increasing use of both model portfolios and UMAs in the next year. This would lead one to believe that asset managers would invest in or reallocate resources to the National Accounts area.

While each member of the team -- externals, internals, hybrids -- is important, the role of the National Accounts Manager is critical. The home office relationship is at the center of a successful distributor/asset manager relationship. It is imperative that Sales and National Account teams work in tandem to support your focus firms. In our recent research reports on wholesaling, one on Internals and one on Externals, we found that 65% of asset managers intend to increase their Internal staff and 59% of firms do not intend to reduce their Externals. Asset Managers do understand this at some level. Our newest research, Excellence in Distribution: National Accounts, shows that 68% of firms plan to increase staff while 48% plan to increase budgets. With the communication and coordination involved in developing strong relationships at the home office, everyone at the asset manager needs to work together to support the focus firms. This effort must have the right person leading the team.

One tactical win/win reason to get your players on this same team is to develop a successful cross-selling strategy. Our FA Vision research shows that, on average, advisors use between 7 and 8 asset management firms (channel stats available, too). If yours is one of them, it is more profitable to cross-sell to these advisors than to find new advisors. This cross-selling strategy should start at the National Accounts level (I realize platform access comes first). At this point our research shows that most advisors usually use between 3 and 4 products from one firm. Of course, every product is not suitable for every advisor, but this presents a great opportunity to work closely with your distribution partner and identify the advisors to go after for your cross-selling efforts. In addition to enhancing your relationship with the distributor, a cross-selling strategy forces the National Accounts team and the Sales team on the same page with a targeted plan to increase assets. This, of course, the ultimate goal of all involved.

The industry is making strides in the right direction. There are still challenges that can be met with creative solutions recommended in our report on Excellence in Distribution: National Accounts.

As we get to the mid-point of the 2010 Winter Games it will be interesting to see if my boys begin to see the individual "elite athletes" or continue to view them all as part of the US team. Your distribution strategy needs to be implemented by a cohesive team to be effective and competitive. At the head of that team, it is time for the baton to pass from external wholesalers to National Account Managers.

Wholesalers Find Success by Focusing on Fewer Advisors

by Steven Miyao

On average, asset management companies' wholesalers currently cover 3.4 states, totaling about 1,550 advisors. These wholesalers average only 1.57 visits per year to each advisor they meet with. Our research has shown that this is problematic for two primary reasons:

1. Many advisors go without any wholesaler visits
2. It doesn't enable the wholesaler to maximize their meeting to sales ratio

Our FA Vision data shows that there is virtually no difference in advisor advocacy when a wholesaler meets an advisor 0-2 times. However, there is a 29.6% increase in advocacy with 2 to 3 meetings, and a whopping 75.9% increase with 2 to 4 meetings.

This data clearly shows that it pays for a wholesaler to see an advisor at least four times per year and that this substantially helps the wholesaler to build a strong relationship with the advisor. On the flip side, it doesn't pay for a wholesaler to meet with an advisor less than 2 times a year.

Wholesalers are pressed for time and have too many advisors in their territories. If wholesalers need to meet with advisors at least four times per year to get a higher yield for their meetings, wholesalers can't cover more than 200 advisors.

To maximize productivity, firms need to identify focus firms and focus advisors within territories and ensure that wholesalers are directed to spend their time with these key 200 advisors. 63% of firms currently incent their wholesalers on focus advisors, while 47% of firms incent wholesalers to spend time with focus firms.

Engaging Your Best Performers - NOW!

by Eric Daugherty

The other shoe is about to drop. Your best wholesaler is starting to get calls from headhunters. Your National Accounts Manager is wondering about her next career move. Your up-and-comer just isn't feeling the same zest for coming to work. So, what are you going to do about it?

According to this article by the Conference Board, U.S. job satisfaction is at the lowest level in two decades. Most of the people I talk to can "feel" this inside their organizations - two years of market volatility, minimal hiring, raises, and promotions, contracted budgets, governmental haggling, and a tough economy have taken a toll on the collective psyche of American workers.

Yet, asset managers are back on firm financial footing. Our preliminary estimate of industry margins shows that firms are creeping back towards a very healthy financial state.

Source: kasina - quarterly financial reports of 11 of 14 publicly traded asset managers (those reporting before 2/9/10)

Now that firms are back on solid ground, expect lots of employee movement, with firms looking to upgrade talent, and stagnant workers looking for new opportunities. The game of musical chairs was temporarily suspended, as firms stopped adding more chairs, and workers held onto their current chair for dear life.

Firms recognize this, as shown in this recent Ignites poll. 82% of firms expect "some" or "a lot" of people to leave as the economy improves - wow!

Source: Ignites 1/25/2010

For most firms, losing people is less the issue than the prospect of losing their best people - in other words, those 20% who do 80% of the work (we all know who they are), and the ones apt to have the most opportunities to switch roles or companies. So, what to do?

Simple - develop an engagement plan for each of your top performers. This is pretty easy, and doesn't take much time. Follow this five-step process to insure that your best will stay yours and stay best over the long haul.

1. Identify your top performers - force rank your team and figure out who the top 20% are.

2. Let each of those folks know that they are among your best - no, you shouldn't share the rankings, and yes, you may be giving them leverage in career discussions. So what?

3. Find out what motivates each of them - in most great performers, there are a lot of qualities that seem intrinsic, but we all have external motivators too. Are their motivators work/family balance, prestige, title, compensation, advancement, cool work, recognition from peers, exposure to senior leadership? Ask. They'll tell you.

4. Jointly develop a plan that will serve the firm's and the individual's needs- include milestones, timelines, and specifics.

5. Pull this plan out periodically (quarterly, at a minimum) and review progress- is the person doing what they need to? Is the company meeting its obligations to the high performer?

This process requires candor, listening, and some time. But, if done right, your best people will get the message loud and clear: "You are one of our best performers, and highly valued. We want you with this company long-term, and contributing at a high level. Let's work together to figure out how we insure that." Do this, and while you may lose some other employees as the economy picks up, you will not lose your best people.

How iPads May Help Wholesalers

by Lee Kowarski

Since Apple introduced the iPad, several articles have discussed how financial advisors will be among the audiences to benefit the most. While iPads can certainly be helpful for advisors, I think that the iPad will have a greater impact on how wholesalers use technology. Before the iPad was introduced, I'd already heard of several asset managers that were considering scrapping laptops for their wholesalers and replacing them with netbooks. I think that firms should now explore the opportunities presented by the iPad to enable wholesalers to access CRM information, access intranet content (e.g. brochures, fact sheets, etc.), present content to advisors (including dynamic charts, videos, and more), and more.

The iPad will boast many advantages over both PDAs (e.g. BlackBerrys and iPhones) and laptops or netbooks:

• Simplicity of use - perhaps the key advantage of an iPad is that it has an intuitive user experience that doesn't require technology expertise. Wholesalers, traditionally, are not the most tech savvy folks and will appreciate the simplicity of Apple's design
• Battery life - the iPad should be able to last a full day of meetings without needing a recharge - the same cannot be said for most laptops or netbooks.
• Weight - while heavier (and larger) than a BlackBerry or iPhone, the iPad is far lighter than any laptop or netbook.
• "Cool" factor - for at least the first several months, having an iPad will be a conversation piece with advisors.

Because asset managers are typically so slow to embrace new technology, I don't expect many firms to get iPads in the short-term, but I do think it is well worth exploring.

Social Media is Here to Stay

by Julia Binder

Asset management firms need to be where their customers are. That's not on their Web sites. It's on Facebook, Twitter, YouTube and LinkedIn.

When we surveyed executives at asset management firms last fall about compliance issues with respect to social media, 73% responded that compliance or legal concerns impeded their ability to participate in social media.

At that time, only a few firms including American Century, Putnam, TIAA-CREF, Vanguard and others had ventured into the lawless Wild West that is social media. They applied existing compliance processes and sought legal guidance to support their as yet limited participation. All waited for clarification from the SEC and FINRA.

Well, FINRA has spoken. And thus, compliance issues around third-party content and record-keeping have been addressed and effectively removed as an excuse to remain on the sidelines. That doesn't mean that firms should dive in without a plan. kasina's newest paper, The Asset Manager's Guide to Social Media, helps firms understand opportunities and challenges associated with social media. You'll find a rich set of examples from the asset management industry and others on:

• Developing a social media strategy,


• Who's doing what and why, and


• Implementing best practices in compliance and monitoring.

The lack of clear FINRA and SEC guidance coupled with the fear of legal repercussions has kept firms from plunging into social media. But consider, as communicators subject to regulation, you are used to building caution into the way you approach all communications.

Social media is here to stay. It's time to review how social media fits into your communications strategy.

Retail + Institutional = 2010 Priority... for real this time!

by Mike Ma

Last week, I delivered a keynote address at the Institutional Investor Institute's Senior Delegate Forum, and I wanted to share the slides with our blog community. My message to this audience, consisting mostly of people from the institutional side of the business, was clear. Given that our blog's primary readers are retail, let me summarize my points and why they should matter to you.

1. The merging of retail and institutional is happening now and you need to care
2. Retail is responding to this but it isn't happening fast enough
3. Real financial and organizational changes are happening right now
4. Institutional organizations are well-positioned to move in on this opportunity

My desire is not to create internal competition. My point is that the walls between these organizations should come down if they want to get in on this opportunity before someone else does.

I would love any comments, or thoughts from the community. Please call or email me to discuss!

Show Clients What They Need: Assets Are Nice, But Income Pays the Bills

by Eric Daugherty

e-Business teams have a huge opportunity to drive improvements in content that clients see. Specifically, when it comes to thinking about retirement, firms do not yet make it easy for clients or advisors to make sense of how their holdings translate into retirement income.

I do not really care about my financial assets - I only care about what they can buy. Asset management firms thus far are not progressive enough in helping investors like me make the connection between assets and future income. In December, this article pointed to a logical starting point - a Senate bill called the Lifetime Income Disclosure Act, which would mandate (for 401(k)s) a calculation of annuity income, similar to what the Social Security Administration does with its annual statements. This would be great, but is only a start.

Most of us have up to three buckets of assets from which we will draw in retirement - and each of the three buckets will have different tax treatment:

1. Pre-tax income; 401(k)s, non-qualified plans, defined benefit plans, for example.
2. Post-tax assets; Roth IRAs and other vehicles on which we have already paid tax.
3. Combination assets; Traditional IRAs and taxable accounts, in which we have some tax basis.

For example, say a couple has $2 million in assets. Sounds great - but is this enough for them to retire and enjoy the standard of living they want? It depends, and requires converting the assets into prospective income streams.

Here's where asset management firms can help. Firms holding these assets have all the information necessary (except the taxpayers' tax rate, which could be asked or assumed) to convert assets into an income stream. Here is how it would work:

This end result (in the Brady's case, $63,420 of annual income) is what investors care about. This is the money they will need for vacations, health care costs, utilities, and food. But most investors will not understand the analysis above, nor will they get it right on their own. They need help - this language of pre- and post-tax assets and annuity streams is foreign to many, and firms should help investors translate this into what matters to them - income. e-Business teams should be thinking about presenting content like post-tax retirement income streams. Even more than slick videos and market commentary will, giving investors content they need will foster loyalty.

2010 Predictions

by Steven Miyao

These are interesting times in asset management. Aside from ups and downs in the markets, we have seen significant changes in the economy, industry product trends, distribution and e-business. So, I will lay out a few prognostications in each of these areas:

Industry trends:

1. Bond flows continue to dominate (>70% of flows) early in the year. Flows into equities dominate (>70% of total) the 2nd half of the year, after definitive data says that the economy is improving. Continuing a long-standing trend, investor flows follow performance. Strong equity flows replace bond flows after the stock market surges and after interest rates start to rise and bond prices fall.

2. Net flows continue to go predominantly to low fee shops, as the miniscule total returns of the past 10 years magnify the importance of fees. Those shops without low fees only draw net flows if their products are truly differentiated.

3. From a trough of 18% in the 1st quarter of 2009, gross profit margins for firms climb back above 30% again (2008 margins were at 30% for publicly traded asset managers). The ultimate winners will be those who maintain their focus and fiscal discipline even after assets recover, setting themselves up for sustained, intelligent growth.

Strategy and product:

4. M&A picks up, in number if not in dollar terms. Firms have shored up balance sheets. Those in the best financial shape look to acquire in order to expand international presence, shore up product gaps, bring on an attractive brand name, and gain scale. Small to mid-size firms with entrenched brand names or specialized product expertise are attractive targets. While we don't expect to see deals of the size of BlackRock/BGI, we do expect to see a handful of mid-size household names change hands.

5. Guaranteed income products become hot, both in and out of retirement plans (albeit hotter in retirement plans than outside). Limiting downside risk in portfolios continues as a focus for retail and institutional investors.

6. ETFs continue to proliferate and gain market share. Advisors continue to gravitate clients from open-end funds to ETFs as advisors understand how to optimize usage of ETFs and firms continue plug product lineup holes with all possible flavors of ETFs.

Distribution:

7. Wholesaler compensation continues to recover. Average total compensation for external wholesalers, which was $372,000 in 2007 and dropped to $295,000 in 2008, fully recovers to 2007 levels. While the ample supply of talent looking for work should suppress wages, firms' healthier financial positions, their desire to take care of their best performers, and renewed positive net flows puts upward pressure on total compensation.

8. Ten of the top 20 firms in assets have hybrid wholesalers by the end of 2010. The cost-effectiveness of hybrids is being proven by the early adopters. Additionally, advisors indicate more willingness to deal remotely and less time to meet face-to-face, both of which point towards internals and hybrids becoming more important.

9. Firms continue to leverage technology by experimenting with video, audio, and web conferencing capabilities to deliver 1-to-1 (wholesaler-to-advisor) and 1-to-many (interactive Q&A with in-house experts) interactions.

e-business:

10. Social media becomes mainstream in financial services, but the level of commitment is varied, some firms diving in with both feet, some much more cautiously. Progressive firms experiment with different media in both B-to-B and B-to-C arenas. By year-end, 18 of the top 20 firms in assets have dedicated pieces of their budgets to social media.

11. Firms begin to move away from considering their websites as the central repository of content and towards supporting broader distributed content (e.g. SlideShare, Scribd). As print costs skyrocket, advisor only content becomes outdated, and people are free to distribute content anyway, firms will decide to make this as easy as possible by making their content portable and omnipresent. One major firm takes the leap, and spends as much on managing and facilitating data and content in the "distributed arena" as they do on their own website.

Have a Policy and Enforce It

by Lee Kowarski

As you may have read in Ignites earlier this week, Fidelity fired four workers for violating the firm's anti-gambling policies by playing fantasy football at work. While I am personally a big fan of fantasy sports and am glad that kasina does not have policies against participating, I applaud Fidelity for enforcing its policies. One issue that I see increasingly popping up in regards to the whole social media trend is the lack of uniform enforcement of corporate policies. As Christophe Veltsos, president of Prudent Security LLC, says, "The easiest way for a company to lose a wrongful termination case is to demonstrate shoddy or selective enforcement of its own internal policies."

Currently, only 34% of firms have a policy that governs employees' online activity outside of work and only 10% have a policy that specifically addresses social networking sites. Many asset management and insurance companies have general policies on the books that technically prohibit participation in LinkedIn and other social networks, but most firms do not enforce these policies. This can certainly lead to complex legal issues if firms selectively chose to act. Every firm should have a clear policy outlining what employees can or cannot do online (both at work and outside of work) and should make sure that the policy can be uniformly enforced.

Finally, please wish me luck in the fantasy football playoffs this weekend.

And Then There Were Ten

by Eric Daugherty

Firms are putting advisors' needs front and center as they upgrade their Web sites.

2009 marks the release of kasina's 11th annual Top 10 Web Sites for Financial Intermediaries report. It's amazing how far firms have come, and how much more vital and vibrant the Web is versus 11 years ago. Back then, firms were still contemplating whether (not how) the Web would become an important client service and marketing channel for them. Today, the notion of NOT having top-notch Web content, tools, and servicing is laughable.

This year's Top 10 Web Sites For Financial Intermediaries had few of the drastic site overhauls that characterized 2008. However, we did see firms striving to meet advisors' needs. In particular:

• Firms are using sophisticated underlying technology to provide a simpler user experience - simplicity through complexity; most notably, this involves bringing content "up" to the users, instead of requiring them to drill "down"
• There is an increasing focus on customization, allowing the advisor to personalize his/her experience and way of interacting with the Web site
• There is a trend towards more interactivity and multimedia content

Specific firms of note this year include:

• BlackRock ascending to the top spot, with a Tool Center that gives advisors everything they need to use the tools effectively with clients, and Conversation Starters that arm advisors with strategies to answer common and challenging client questions



• John Hancock continuing its run in the Top 10, with Dynamic Literature Ordering and a keen focus on its brand
• JPMorgan jumping from #9 to #3 based largely on its simplified presentation of fund analysis via dynamic screening, as well as its Markets Insights program

At kasina, we're looking forward to discussing the insight gleaned from this year's report with all of our subscribers. To discuss these findings, or other aspects of the report, E-mail us with questions or thoughts. Or better yet, use the kasina forum to post thoughts and questions.

Americans Determined To Save More - But Will They?

by Eric Daugherty

This recent article by Money Management Executive details that the financial crisis has led the majority of Americans to resolve to set a financial goal for 2010. Resolutions are good. However, every year I resolve to save more, eat less, grow three inches, get better looking, and become funnier. So far - no good. Aspirations only go so far.

Asset management firms have a prime opportunity to help investors fulfill their resolutions - and grow their own client bases and assets as a result. The key challenge is how to get people to sacrifice gratification now for betterment later. While not exactly a parallel, research into solutions for classic "Tragedy of the Commons" problems sheds some light on the ways in which firms can help investors keep these resolutions.

People will sacrifice today for an unclear positive outcome down the road if they are armed with:

• Information - knowledge as to why their resolution to save and invest is a wise one, and how to do it best
• Identity - a sense of belonging to something important and special
• Institutions - belief in the institutions that help them
• Incentives - rewards for positive behavior

How could this look in the investment management space?

Firms could - and should - strive to promote:

• Programs of education and affirmation, multi-channel, multi-media - on the web, radio, TV, to both clients and prospects alike;
• A sense of belonging to a special club, both within their firms and as part of the larger community of like-minded investors. Social media is an ideal tool to carry out this vision;
• Absolute assurance that their firm is committed to doing the right thing, above reproach, and both economically and ethically healthy;
• While we cannot pay clients to invest with us, we can help them help themselves by devising ways to make better decisions - default 401(k) contribution elections are one example, automatic transfers from checking to savings in the banking world is another.

Firms have a unique opportunity - but one that may recede. I am at the gym every day. The first three weeks of the year, the gym is packed with those who have made New Year's resolutions. By February, there is no longer a wait for the equipment.

Investors have been shell-shocked into resolving to change their behaviors. Firms who can capitalize and help investors follow through on their resolutions will benefit the investors and themselves.

Getting Shareholders to Vote Their Proxies

by Lee Kowarski

I know that many people (including myself) find proxy issues to be extremely boring. That said, I believe that mutual fund companies have a desire to get more investors to vote their proxies, and there is an opportunity to do so by making the proxy voting process smoother.

Last month, the SEC proposed important revisions to the proxy rules under the Securities and Exchange Act of 1934, requiring that proxy materials be made available on the Internet and permitting issuers to use a modified form of the "notice and access" model (in which issuers send shareholders notifications of the online availability of proxy materials, but not the full materials). The comments on this proposal have focused on problems with notice and access, but not on the real need or opportunity: to better educate investors about how to easily vote their proxies.

• The ICI's View: In a comment letter back to the SEC on November 20th, the ICI supported the use of the Internet to provide proxy materials to shareholders, but remained critical of the notice and access model because the modifications "[fail] to rectify one of the largest impediments to a successful notice and access model for proxy solicitation - the mandatory separation of the proxy card from the notice." The ICI feels that not allowing issuers to include proxy cards along with the notice in the initial proxy mailing will continue to have a negative impact on the number of proxies voted, and will also add costs for fund companies.
• My Take: Rather than simply sending out proxy cards along with the notices, investment companies, shareholders, and the environment would all be better served by improved notices, something that the SEC's proposal touches on. As the ICI's comment letter rightfully points out, the SEC's proposal "would permit issuers...to accompany the notice with an explanation of the notice and access model 'in order to mitigate confusion' and better allow issuers and other soliciting persons to engage shareholders." If adapted, this flexibility to explain the notice would clearly help avoid the confusion that has existed in the past and can serve to increase voting rates. If firms are permitted to focus this explanation on driving shareholders to the Web (not only to access proxy materials, but to vote their proxies), it is likely that a higher percentage of shareholders will take action and investment companies can save the cost of sending out additional hard-copy materials.

I encourage investment companies (and service providers) to monitor where the SEC settles on this issue and to get creative with how they clarify their notices to best drive investors to vote their proxies.

Here Comes The Earnings Rebound

by Eric Daugherty

BlackRock's earnings are a sign of what is to come. While we might not be back where we started in the market or with investors trusting the industry, we are close to claiming a return to healthy industry profitability.

kasina looks at industry profitability quarterly, using data available from the publicly traded asset managers, and triangulating with news and other insights. Starting in the second quarter, things began looking better for the industry.

That earnings started to rebound in Q2, 2009 is no surprise. In our industry, earnings are a function of assets under management and cost structures. While we took huge earnings hits in Q4, 2008 and Q1, 2009, companies responded by cutting their cost structures, with roughly a one quarter lag to the market turmoil. By the April/May timeframe, most of the cost cutting had been done - right in time for a healthy market rebound.

We anticipate that the drag of 1Q and 2Q, 2009 will still leave full-year 2009 average margins at about 27-28%, shy of 2008 (29.7%). The good news is that the industry is prepared to capitalize on the market rebound and skinnier cost structures and have robust earnings in 3Q and 4Q that are equal to or better than they were prior to the market meltdown. We anticipate 3Q operating margins averaging 31-32% and net margins of 22%, both numbers better than full-year 2008 margins.

With healthier balance sheets and P&L's we anticipate that firms will return to a focus on growth opportunities, particularly M&A and selective product innovation. It is a bit premature to declare that we are out of the woods. Certainly we need to learn lessons from the recent turmoil, there is still downside risk in the market, and there are challenges to regaining public and investor trust. However, it does appear that industry profitability is back on solid footing.

What Sales Can Learn from Golf Company

by Mike Ma

There is a recent 60 Minutes episode in which Scott Pelley travels with a Marine regiment in Afghanistan. I found it enlightening at first as just a general citizen, and then from a business perspective. Sales managers and consultants have made a cottage industry of sales-to-military comparisons, and we can learn a lot from this episode and apply those lessons to our business.

NB: Before I dive in, I'd like to say that in *no way* do I think that sales work is near the same level of import as the work of those in harm's way. This is merely an observation of strategy and tactics.

Consider the following quotes from Lieutenant Colonel Christian Cabaniss, the leader of this particular regiment. Two lessons stood out for me:

1. Success is not defined body count -- Asked how many enemies have been killed so far, Cabaniss said, "I have no idea and it's really irrelevant. [Body count] doesn't tell me that I'm being successful. It doesn't tell me that at all. The number of tips that I receive from the local population about IED's in the area, Taliban in the area, that is a measure of effectiveness."

2. Marines are expected to evaluate the endgame before pulling the trigger -- "It's about a three second decision [if a Marine ought to fire] his personal weapon. The first second is 'Can I?' The next two are 'Should I?' 'What is going to be the effect of my action? Is it going to move the Afghan closer to the government or further away?'"

Can we learn something here? After all, aren't we in a version of a similar situation? Advisors are elusive. Profits have become mountainously difficult. We are looking for the influencers in a corner office who can tip us off to more sales or exposure for our products and firm. Perhaps we should change our game as well?

As we at kasina are in the throes of a number of strategic planning processes, let me take stab at coming up with two comparative industry lessons:

1. Success should no longer be defined as a pure gross sales number
2. Salespeople should be expected to consider profitability when planning their activity

Toward the first point, compensation plans need to be designed to help transform the discussion from the "old game" to the "new game." There needs to be a shift from gross commissions to bonus metrics that we think help our business in good times and bad. I think that Ivy Asset Management paying 20-30% of compensation in activity-based bonuses is a step in the right direction.

To the second point, sales management (and consultants for that matter) needs to work on creating an easy, understandable process that can help wholesalers evaluate the endgame. Some examples may include setting targets to increase the number of new producers in a region regardless of size, converting business from one product to another, or one asset class to another, or conducting more meetings with a pre-established advisor segment of value.

Just like Lt. Col Cabaniss' "three second" idea, we have to think of activity-based metrics that strike the balance between simplicity, effectiveness, and speed. That's our job as managers (and consultants).

Ten Years After - The 10 Year kasina Anniversary

by Steven Miyao

I am happy and proud to announce that kasina is now ten years old. When Lee and I founded kasina in September of 1999, we never could have imagined or planned for the events that shaped our company. I would like to take this opportunity to thank all of our clients, supporters, current and past employees, and our families. Without all of them, the success of the last ten years could not have been possible.

Below, please find a brief chronology of the last ten years:

1999
- Shortly after we started kasina out of a coffee shop in the East Village, we publish our inaugural "Top 20 Web Sites - Mutual Funds" report. We also conduct our first Roundtable event, which brought together executives to discuss industry trends and best practices.

2000
- We move into our first office on 180 Broadway, across from the World Trade Center. During that year, we publish our first study about institutional Web sites.

2001
- kasina introduces the revolutionary "Hybrid Wholesaling" concept in its "e-Wholesaling: The Distribution Solution" report.

- On September 11th are evacuated from our office during the attack on the Word Trade Center and find refuge in the offices of the Silicon Alley Reporter and then at Andy Sernovitz's company, Gaspedal.

- Mike Ma joins us a week after our evacuation, working in our makeshift office. He later becomes a Principal of our firm.

- The dot-com bubble bursts and the industry experiences an eight month recession.

2002
- kasina responds to growing European demand by holding its first Roundtable in London, UK.

2003
- "Intelligent Distribution: Targeted Interactions for Increased Profitability" is released, marking our first distribution study. It calls for a focus on profitability through the improved use of customer data to better segment financial advisors.

- The kasina Youth Foundation was brought to life due to our belief in the importance of receiving a good education. We all developed a love of learning because caring people provided us with opportunities and advantages. The Foundation is a way for us to give back to the community by supporting organizations that provide these same opportunities to children who are not as privileged.

2004
- We tackle advisor behavior in writing the groundbreaking "The Six Segments: A Comprehensive New Look at Intermediary Behavior" study. It is the first report to examine the behaviors and tendencies of U.S.-based financial intermediaries across all distribution channels.

- We kick off our first Distribution Summit and invite a cross section of distribution executives from sales, marketing and key accounts to discuss the future of distribution in that asset management industry.

2005
- We write our first blog piece as part of our effort to communicate with our clients in a more timely fashion on topics that are important to the asset management and insurance industries.

- We publish our compensation study, "Trends in Wholesaler Compensation," which calls for profitability-based sales compensation systems.

- We move into our current offices at 581 Avenue of the Americas.

- We invite key wholesaling leaders to our first Wholesaling Roundtable.

2006
- Due to the increased importance of the institutional buyer, we invite the industry's most influential national accounts executives to our first National Accounts Roundtable.

- In our first Marketing Roundtable, we discuss the changing role of marketing in the asset management industry.

2007
- The Web evolves to facilitate interactive information sharing and collaboration and we become an early advocate for these next-generation Web technologies with our "The Asset Manager's Guide to Web 2.0" report.

2008
- We release our tenth anniversary edition of the "Top 10 Web Sites for Financial Intermediaries" report.

- We publish our first "Future of Distribution" research paper.

- We respond to the global needs of our clients by publishing our first "Top 10 Global Retail Asset Management Web Presences" report.

- We write "Your Site Can Sell, Too" to prove that sales are aided by firms' Web sites.

2009
- kasina and Horsesmouth partner to create and launch FA Vision - the industry's largest-ever survey of financial advisors, giving asset managers frequent, affordable, and transparent data and strategy insights

- On September 16th, kasina celebrates its ten year anniversary

Investor to Financial Firm: How To Earn My Trust

by Eric Daugherty

A colleague whom I met recently is thinking of starting a web-based business aimed at young investors. She asked me how to build a "trusted" brand. This got me thinking about what investors would say to financial firms regarding building trust. Here's what that would sound/read like.

Dear Financial Firm, Advisor, or Broker,

There is a lot of noise in my ears from talking heads on TV, market updates, friends at the water cooler. It is hard to know whom to trust. I want to trust you. I need to trust you. There are very few people I need to trust . Trust only matters if:

• We're dealing with something important; and
• I cannot easily and quickly verify the value proposition I receive over time and ascertain whether I got a good deal.
• In other words, I only really need to trust my wife/husband, my doctor, the folks who made my car, and my financial provider.

The good news is that earning my trust is easy. Aside from the obvious aspects of a customer/provider relationship that are givens (answer my calls, do not make errors on my account), here is what will engender my trust:

1. Be clear on what I get for my money. How much do I pay and what does it buy me? What is the value proposition in plain English? I am a smart person in my field, but that field is not finance, so talking about basis points, double reverse inverted ETFs, and straddles based on the VIX just makes me feel overwhelmed. Help me understand what I will pay, in dollars, for what I receive.

2. Tell me how you make your money. Shed some light on your incentives. I am suspicious unless I understand what's in it for you. I don't mind paying a fair price and you deserve to make a profit. If you charge more than others, tell me why. What is different about your product or service that warrants a higher price? If you don't share this information, I will presume that you are hiding something.

3. Don't play with the truth. Burger King sells me on taste and convenience. If they tried to tell me that my Double Whopper with cheese was good for me, I would be angry. If Walmart tried to convince me their clothes were high-end, I would not trust them. Yet brokers try to convince me that I need to trade stocks to make money, and closet index funds try to charge premium prices with no additional value provided to me. If not dishonest, this is at least disingenuous.

It's as easy as that. I want to trust you. Tell me the truth. Explain in plain English what I get for my money and what's in it for you. Serve me well, and I will be your loyal investor for years to come.

Sincerely,
Joe or Joanne Investor

Is it Easier to Service the RIA Market Today?

by Deb Wetherbee

Historically the RIA market has been a challenging channel for asset managers to cover for many reasons. Generally speaking, RIAs do not like wholesalers, do not feel asset managers contribute to their value proposition, have fickle, "entrepreneurial" personalities, and are located in disperse geographic locations. This makes coverage models frustrating and expensive. However, there are clear signs that RIA receptivity to asset managers is changing.

The current market environment has led many advisors to change firms and to shift channels altogether. In addition, RIAs core investment philosophies were tested over the last year. These facts, combined with asset growth in the channel, make the RIA channel very appealing. More than 70% of RIA's new assets are coming from full service firms, according to a TD Ameritrade survey.

By some accounts, it appears that RIAs may even be eager for your advice. We saw this in the wirehouse and independent channel as early as last December. Our partner, Horsesmouth had a record number of financial advisors seeking out content, asking for advice on how to talk to their clients, and simply looking for a place to share the horrors of the day. These sentiments were echoed at kasina's recent Distribution Summit by Ron Fiske, EVP at Fidelity, as he discussed the Registered Investment Advisors that his division services. After selling to RIAs in the late 1990's myself, it was refreshing to hear that the time may have come for RIAs to willingly accept information from asset managers. RIAs are looking to understand and to provide clients with explanations. Whether economic, portfolio related, or tax-centric, it appears that your thought leadership will now be well received.

This paradigm shift, in conjunction with the fact that RIAs appreciate web-based communication, makes servicing them a profitable proposition. Our FA Vision research shows that 61% of RIAs prefer web / e-mail based communication over the more expensive phone and in-person service. There are many successful hybrid teams servicing this channel, which is a much more efficient distribution model.

As you develop your 2010 plan and focus on profitability, think about the RIA channel. Keep in mind that you may finally be able to leverage your existing content. Review your economic and portfolio manager content and communication strategies, and think about webinars and hybrids. It is even likely that an existing business-building program is perfect for this audience. The strategy to grow your RIA business could be a profitable one for a change.

Thinking About Sales Compensation? Listen to Science for 18 Minutes

by Mike Ma

For anyone redesigning a wholesaler compensation plan right now, I strongly suggest spending 18 minutes listening to this TED talk by my BFF, Dan Pink. The crux of this talk is powerful, "There is a mismatch between what science knows and what business does." If you make it through the video, please read on.

There are a couple of conclusions revelant to our undustry that can be drawn from this talk. Given that you are still reading, I am going to set aside the possibility that you don't believe in any of this social science and think that its garbage. With that assumption made, I'll go on to say that we are either admittedly behind the curve as an industry, or that we think wholesaling is not a "Candle Problem," but rather has a "simple set of rules, and a clear destination to go to." I think most sales managers would argue that their team is highly trained in consultative selling and in building empathic, deep relationships with advisors. Neither of these skills is like building widgets, so why are we paying for them as though they are?

I have engaged in many conversations regarding compenation in recent weeks, and have concluded that if we really want to move the dial, we need to change our focus. With the exception of bigger carrots and sharper sticks, what in our compensatoin plans is upping the level of employee engagement? How are we motivating our team to become masterful in the art of helping advisors through rough times? I think we should pay wholesalers enough and competitively. I would further argue that they should be paid handsomely for their work, sacrifice, and contributions. However, we are looking at the wrong dial on the dashboard to determine how we motivate our team. If we can't pay on Autonomy, Mastery, and Purpose (Pink's big three), we can at least move closer by paying for activities and net-like components that meet the wholesaler halfway between gross sales and the HR nirvana that Pink describes.

We don't have to get all the way there, but moving a little closer to what science knows would be wise for management now. Given where the labor market is today, when are we ever going to make a move to a better place for our industry if not now?

Experimentation - It Takes Guts, Pays Glory

by Mike Ma

There are two ways to get fired from Harrah's: stealing from the company, or failing to include a proper control group in your business experiment.
- Gary Loveman, CEO, Harrah's Entertainment, MIT Sloan Management Review, August 2009

Think about that statement for a second. Two quick conclusions can be drawn. First, Loveman assumes that everyone should be conducting experiments in their businesses. Second, if you experiment poorly you are committing an act equivalent to stealing - a pretty powerful statement.

We are in the throes of business planning for 2010. Now is the time to learn from the problems of growing budgets by an arbitrary 10% in fat times and cutting across the board by 10% or more in lean times. Both methods have failed the industry, and we are left to figure out what works and what doesn't. When we arrive at this kind of reckoning, we typically pull our managers around a table and make gut calls about "what we see on the frontlines" or "what will bring us inline with our competitors."

I propose that we start supplementing these important, qualitative discussions with data from experiments conducted inside a firm's four walls. It takes guts to do this, since it requires:

1. A Control Group - As Loveman states, we have to choose to not do something to a segment of our clients or workforce, and that is admittedly hard. It is understandable to think that if something can give us or our team an edge, it should be applied to everyone. But without a control group, you can't know what was received and what the value of the investment was.

2. The Possibility of Being Wrong - In essence, you need to be making bets, and bets are scary, especially if they don't pan out in this economy.

In my talks with executives over the past few weeks, I have started to hear some good ideas on how to run these experiments. The best examples seem to involve starting small in order to gain familiarity with the process and its benefits. By experimenting with different coverage models, value added programs, and e-Mail messaging this year, we can begin to decide what adds real value to our businesses and what can be redlined in good faith.

We need experiments starting now, folks. Otherwise, we are just guessing.

Government Initiatives Will Help Us Help Investors

by Eric Daugherty

Financial firms have had a rough year, but the future is brighter. One reason is that the government, despite recent harsh comments about the industry, is showing signs of being an ally in the fight to help citizens become better investors.

As I discussed in a July blog piece, "Bundled Pricing Obscures Value Propositions for Investors", financial firms provide three primary services to investors:

• Access to capital markets to invest their money
• A place to take a shot at beating the market (pursue alpha)
• Advice

While I believe the second of these ultimately detracts from investor returns, the first and third of these services are good and needed. Therefore, our government should do everything in its power to incentivize citizens to invest and get financial advice from trained professionals. As a Certified Financial Planner professional, I believe that financial planning for 90% of the populace is very simple:

• Save and invest more
• Diversify using low cost investment choices
• Rebalance periodically
• Repeat

Asset managers and the government should use all the tools at their disposal to encourage citizens to follow this simple road map.

Government's most powerful weapons are regulation and financial / tax policy. Two recent news items lead me to believe that both of these weapons could and will be wielded to encourage ordinary investors to do those things that are beneficial to them.

First, President Obama's retirement proposals suggest that government can and will support the creation of vehicles and incentives to increase savings. Secondly, as outlined in this Business Week article on a possible soda tax, America continues to creep ever closer to deeming certain things as "good" (healthy behavior) and others as "bad" (e.g. unhealthy foods, carbon emissions) and to find ways to subsidize the former and penalize the latter. Can further moves to spur Americans to save and invest more (to be physically and fiscally healthy) be far behind?

Both of these indicators bode well for American investors and, therefore, for financial service firms. If government continues to push citizens to save and invest wisely, and do what is good for them, those of us who provide needed, high-quality products and advice will benefit. If asset managers are smart, they will support and ride this wave by lobbying, educating their shareholders on pending proposals and legislation, and proposing additional ways that government can help investors help themselves.

Excessive Fee Case - Earthquake or Tremor?

by Eric Daugherty

Look for the Supreme Court to send a message to the fund industry, but not to support fee caps or other interventionist measures. Even if the Court does not find in favor of the plaintiffs in the Jones v. Harris case (for background, see this Wall St. Journal online article), firms should anticipate continuing scrutiny around fund simplicity, independence, and transparency going forward.

It is remarkable enough, and a sign of the troubled times in the financial industry, that the Supreme Court is going to hear a case on excessive mutual fund fees. What will the outcome and lasting implications be for the asset management industry?

The case hinges on the fairness of fees and the independence of the directors that set those fees. With all the focus on executive compensation lately, the case has drawn attention to the level of executive and Board compensation and how those costs can inflate fees.

The precedent in question in this case is the so-called Gartenberg standard, which indicates that an advisor breaches his fiduciary duty only if fees are so disproportionately large that they bear no resemblance to fees that could be negotiated on an arms-length basis.

Fund industry veterans know that fees are unjustifiably high for some funds. It is clear that not all fund directors are truly independent and that boards take most of their direction on fees from management. However, one is hard pressed to say that investors do not have choices or that competition does not drive expenses lower . Fund flows are increasingly going to lower cost funds (laid out here - and this trend continues today).

So no matter how egregious the fees of a fund, investors have plenty of choice and can take their money and turn to lower-expense funds at will - and they do. That is competition. As such, while I am not a lawyer, I do not see the Court deciding for the plaintiffs in this case.

However, I do think the Court will find a way to send a strong statement to the industry: SIT! In this case, SIT stands for Simplicity, Independence, Transparency. The system we have in place for investors to invest in mutual funds works, but only if products are simple enough to understand, boards are independent enough to undertake strong oversight, and communication is transparent enough for all to see what is going on. Don't expect an earthquake of change and reform to germinate from this case, but there will be some tremors resounding after it is over. Asset managers should be anticipating these tremors, and should be thinking now about how to position their products to meet the SIT test.

SEC-FINRA Warns Investors

by Eric Daugherty

If your Uncle (Sam) is your (Big) Brother, are you better off? And, how much should governent be doing to protect us from ourselves? These questions arose from the joint SEC-FINRA alert regarding leveraged ETFs and sparked debate in our office last week. On the one hand, some of us are anti-government-intervention and pro-free market. Do we really need Uncle Sam (or in this case Uncle Sam AND the industry) playing Big Brother and telling us what is suitable for our portfolio? On the other hand, the last few years have shown us that there is too much complexity and opacity in financial products, and American investors hold too much in their portfolios that they do not understand.

We will certainly continue to see more of a push for transparency in product details, which is needed. Leveraged ETFs are a perfect example of how a seemingly great idea can actually be a wolf in sheep's clothing. In theory, leveraged ETFs may make absolute sense for investors who are willing to expose themselves to magnified gains or losses. If I am 30 years old, rich, smart, good-looking, and charming (hey, if I'm claiming to be age 30, might as well embellish across the board), believe in the market going up over my 50-year investing horizon, and am willing to accept additional risk, why limit myself to an arbitrary 0-100% stock allocation instead of investing in a 2X market portfolio? This was once vein of the argument in our office.

In concept, it made sense. Then we delved a bit deeper. It turns out that we didn't full understand the intricacies involved in these products. Specifically,

• Even over long time horizons, ETF returns can significantly decouple from the benchmark return
• To maintain the leverage ratio, the ETF must buy into rising, and sell into falling, markets
• Almost by definition, they have high transaction costs, leading to high expense ratios See this slightly dated, but readable (and pro-leveraged ETF) article here that does a decent job of laying out the mechanics.

We have blogged before about the need for certain, innovative products. We hold products up to a litmus test that asks:

• Does the investment fit a particular investor need or solve a problem in a compelling manner?
• Is it reasonably low cost?
• Is it simple, transparent, and understandable enough for the average investor?

All three points here are vital: leveraged ETFs can say yes to the first, but not to the remaining two.

It would be ideal if investors and their advisors would do all the due diligence required to evaluate investment products fully, or learned quickly from being burned. Until then, though, expect this new age of oversight and industry/government collaboration to stick around for a while.

How Asset Managers Should Use LinkedIn

by Steven Miyao

In the August addition of our Industry Analysis, a monthly service that helps asset managers evolve their online offerings, I wrote about how asset management companies have a real opportunity to take advantage of the LinkedIn Networks that their wholesalers have built.

There are approximately 700 mutual fund wholesalers and 46,000 financial advisors on LinkedIn. Most asset managers have been ignoring this platform, despite the fact that it offers an easy opportunity to connect with these clients.

LinkedIn is different from most other social media sites (such as Facebook and Twitter) because it is exclusively a user-driven, professional networking site. The site was originally a career building site on which users could post their resumes and interact with other professionals in order to gain access to job opportunities. Over the last few years, the site has evolved to provide wholesalers and marketers with the ability to interact directly with targeted advisors.

Your wholesalers hold the key to your firm's LinkedIn success. They are the individuals within your organization who have established a network with the advisors. Therefore, advisors will want to connect with them online in the same way that they connect with them in person.

Many wholesalers and advisors employed by firms that restrict LinkedIn connect to the network on their home computers. Merrill Lynch seems to be one of the firms that restricts access at work, but 6,855 Merrill Lynch financial advisors are on LinkedIn. Asset managers can choose to ignore the trend towards active usage and restrict access, or they can embrace usage and find ways to incorporate LinkedIn into their general business practices. Some firms may not find a way to take advantage of this medium, but their competitors most certainly will.

Help your wholesalers to improve their LinkedIn profiles. When your wholesalers connect with advisors, they should represent themselves and the firm in the best light. We recommend the following six steps when updating your wholesalers' profile pages:

1. Make sure they complete 100% of their LinkedIn profiles to include:
- A current position
- Two past positions
- Educational background
- A profile summary
- A profile photo
- Their specialties
- At least three recommendations

2. Encourage them to get key recommendations from their advisors

3. Provide them with a profile picture that they can upload

4. Include your advisor Web site URL

5. Ensure that they do not block incoming e-mails

6. Show them how to create polls

LinkedIn is going to continue to gain popularity among financial advisors and wholesalers. Start the process now, keeping compliance challenges in mind. Your firm will get a leg up on the competition by helping your wholesalers take advantage of this medium.

Will Your Best People Flee Once Recovery Takes Hold?

by Eric Daugherty

In the next few weeks we will be publishing the results from our 2009 Sales Compensation study. Compiling the data was a lengthy, arduous, and enlightening process. As you would expect, data reveal that quantum changes have taken hold since our last Sales Comp study in 2007. More interesting to me than the data itself, though, is what we heard from the many interviews we conducted with industry executives. Companies reacted to the economic crisis and changed their treatment of employees in a multitude of different ways.

Broadly, companies reacted to the crisis on a continuum that ranges from "duck and cover" (change nothing, wait for the storm to pass) to "opportunistic rationalization" (use the crisis as an opportunity to make needed and innovative change). Most striking, however, is the difference in how companies are treating their employees, particularly their best performers, during the crisis. Some companies continue to reward their best employees handsomely while cutting back the pay or positions of lower performers. Other companies seem to be intent on sharing the corporate pain equally across all employees, cutting pay, perks, and positions across the board.

This latter option is dangerous. While it sounds good, fair, and right to share the pain across the board, the reality is that doing so puts the long-term health of the firm at risk. We all know that top performers add far more value than lower performers (to the tune of 2-4x the level of productivity). The 80/20 rule is real. Top performers are also most likely to continue to work their tails off despite the challenging environment, and may be discouraged if this extra effort yields reduced pay. They are the ones who will have the most opportunities to leap to a competitor if/when the market turns around. Our interviews reinforced that this industry is a tightly-linked network. Your competitors all know who your best people are, and they will snatch them from you if you do not keep them engaged and happy.

So, what do you do when resources are at a premium? We found that a few companies are getting creative:

• Eliminating other roles instead of making compensation cuts for high performers


• Using discretionary bonus pools to disproportionately reward higher performers


• Giving high performers additional responsibility, territories, perks, recognition or other things to ensure they know how important they are to the organization

It would be easy to ignore the threat of turnover these days. There are enough other things to worry about: cash flows, regulation, etc. However, as the financial market rebounds, so too will the job market. The first employees to leave will be high performers who feel unloved. Start thinking about this now, because replacing high performers is difficult.

Speak Up or Live with the SEConsequences

by Lee Kowarski

Asset management firms need to speak out about the administration's proposal to give the SEC the power to create "rules prohibiting sales practices, conflicts of interest, and compensation schemes for financial intermediaries...that it deems contrary to the public interest and the interests of investors." The full text of the proposed regulation is available in a PDF document on the Treasury Department's Web site.

Managers should be very concerned about the lack of specificity in the July 10th proposal. However, as Ignites pointed out yesterday, the industry has remained silent on this topic. As currently worded, the Commission would be given free reign to limit and potentially eliminate, revenue sharing, sales loads, commissions, and possibly other pieces of the industry's current financial structure.

Personally, I am opposed to the SEC acquiring any additional fee-setting powers. I believe that such issues are better addressed through clear and easy-to-understand disclosure, and would prefer to see the Commission focus that rather than their current notion of "the public interest". That said, asset management firms - either through the ICI or individually - must articulate their position on this critical topic. Companies should speak out loudly and quickly in order to influence this legislation and ensure that they, and their distribution partners, retain the flexibility needed to be profitable businesses.

Crisis = An Opportunity Not to be Missed

by Eric Daugherty

There is a silver lining around the turmoil in the financial markets over the last nine months: people are paying attention and taking things seriously. Yet some asset managers are not capitalizing on this unprecedented opportunity to be pioneers.

In 1999, I attended a contingency planning conference where the organizers polled attendees. Question: What needs to happen for contingency planning to be taken more seriously in your organization? The #1 answer: A real disaster.

Contingency budgets ballooned after the tragedy of 9/11, and there was a laser-like focus on contingency planning. The parallel to the current financial markets meltdown is clear. Investor engagement in financial affairs is at a peak not seen since the Great Depression. A Money Management Executive article from July states that more retirees are worried about their finances and that 61% are working with a financial adviser (up from 56% in 2008).

"Turbulence is life force. It is opportunity. Let's love turbulence and use it for change."
-Ramsey Clark

There is a huge opportunity for asset managers to seize the day. Some firms seem to realize this; others do not. Over the last three months, we have spoken with senior managers and executives at most of the asset management firms. Their reactions to the markets crisis fall into three clear categories:

• Denial - the thought process here is, "This too shall pass. If we just duck and cover, conduct business as usual, and let time lapse, we will wake up in 2010 and the world will be right again."
• Defensive - "This is too serious to ignore. Clients and regulators expect us to be doing something. So, let's do what we can to avoid being labeled as the bad guy, and make some cursory changes in communication, product lineups, and management to show that we are part of the solution."
• Opportunistic - "The world has changed. There is an opportunity for innovative solutions and products and there is a dearth of communication and trust. We will fill that gap. Now is the time to be bold. We are here to help our clients and to lead them to greater financial security by being a trusted partner."

Note that these attitudes exist not just for companies, but for divisions, departments, and individuals. This is important because any person or entity can drive a discussion around which of these paths to take. For example, we spoke to one sales manager who said (paraphrased), "My team cannot afford to deny that the world has changed, and we cannot wait around for our clients, our competitors, or our firm to impose change on us. We must redefine what role we play, how we play it, and how it adds value to our firm in the new reality. My job as a progressive leader is to drive that redefinition."

Now more than ever, people are looking for straight talk, simplicity, products that meet their unique needs, and advice. There will be winners that emerge from this crisis. The winners in our industry will be the ones who take the opportunistic approach to confronting the crisis and meeting it head-on.

Fighting the Downturn from the Top Line

by Mike McLaughlin

Amidst the ongoing cost-cutting across the asset management industry, an old Harvard Business Review article provided me with a good reminder this week.

Leading Change from the Top Line presents an interview with Schering-Plough executive Fred Hassan and his strategy for turning around flagging businesses. Mr. Hassan's approach contains good food-for-thought for asset managers.

Unlike many of his peers, and, coincidentally, current asset management executives, Mr. Hassan prioritizes top-line growth to navigate difficult business environments. In other words, in tough times he focuses on motivating and investing in salespeople to foster a business turnaround. Three primary reasons:

• Product development cycles (in Mr. Hassan's business, and in ours) are too lengthy to immediately transform results.
• At some point, there are no more costs to cut. Cost management can help for a year or two, but top-line and market share growth do more to ensure long-run success.
• Salespeople most directly impact clients' moods. As their morale goes, so goes that of clients. And damaged or lost client relationships can take 6-18 months to repair.

That last point resonates most with me. Assuming the markets eventually recover, a motivated, positive salesforce can enable a firm to take advantage of that recovery ahead of the competition.

Of course, many asset managers face additional issues within the sales ranks. Specifically:

• Firms have already shed many wholesalers.
• The wholesalers that remain in place are not the happiest campers. Any loosening of the labor market will bring a lot of turnover along with it.

So where does this leave us? For firms to position sales to help lead themselves and their customers to greener pastures, I think firms need to take honest stock of three things:

• Sales Morale: If the market recovers later this year, how much turnover will we see? How much disruption will this turnover cause to our relationships and our business?
• Compensation Structure: Does our sales compensation model do enough to protect our sales professionals in down times and the firm when business is great? Or does it ensure drastic highs and lows that undermine the stability of the team?
• Team Structure: How can we inject or augment our use of hybrid wholesalers to expand our relationships with advisors and gather assets more cost-effectively?

It is vital that firms undertake these analyses now, not after things have turned for the better. By then, it'll be too late. Proactivity on all three fronts - morale, comp, team structure - will position firms to deliver on Mr. Hassan's tried-and-true strategy of using the sales team to lead business turnaround.

Regaining Investor Confidence

by Eric

Investors' primary concerns these days are twofold: (1) is my money safe? and (2) does investing still even make sense? Asset managers and advisors used to have to prove the superiority of their products and services. Since the market meltdown and abuses of investor trust, though, the importance of stacking up versus the competition fades to a distant third after the two questions above. If asset managers are to grow and thrive post-recession, they need to face these two questions head-on.

The first of these questions is fairly straight-forward. Investors have heard enough about Madoff and Stanford to be very wary of turning over their money to just anyone. Discerning the real good guys requires some diligence. Ultimately, reputation, track record, social media, feedback loops and ratings, client loyalty scores, and redemption rates will all signal to investors who is trustworthy and who is not.

The second question for the industry is far tougher. Many investors regret having invested their savings over the last ten years (the "lost decade"). Investing in the markets, once taken for granted as a smart thing to do, has yielded poor returns for many investors. However, there are two ways for investors to react to the results, and the difference between these two viewpoints is vital for asset managers.

Some investors infer that they made a bad decision to invest at all. Others see the results as bad outcomes of good decisions, which happen from time to time. This is not just an academic distinction, because it has implications for future decision making. To hammer home the point, offer me an even-money bet based on the roll of a fair die: I win if it comes up 1, 2, 3, 4, 5; you win if it comes up 6. We roll the die, it comes up 6, and you win. Did I make a bad bet? No! I took a risk and made a rational decision that did not work out, one that I would take again as many times as you offered it.

One cannot always infer the quality of the decision merely from the nature of the outcome. Investing in the markets the last ten years did not work out too well, but that does not mean the decision to do so was poor. Inferring that they made a mistake may cause investors not to invest going forward, and this would be a mistake. Over the long haul, substantial evidence indicates that broadly diversified and regular investing in productive enterprises increases wealth. However, how one does so may change.

Some investors have learned that their risk-tolerance is not as high as they thought. For those clients, new products or services may be in order. Structured products with downside protection (e.g. principal protected notes), annuities, or portfolios including diversification beyond the standard long-only style box coverage may give some investors peace of mind and the courage to continue investing.

Asset managers and advisors recognize that investors are emotional. It is human nature to blame decision making for poor results; this minimizes the role that risk plays and leaves us feeling more in control of our destiny. But our rational mind knows that randomness plays a role in determining outcomes.

Therefore, if asset managers and advisors want to continue to thrive, they need to convince people with assets that investing still makes sense, and that investing the last ten years was a good decision with a bad outcome, not a bad decision. Only after making a strong case for their own trustworthiness and the sensibility of investing at all will asset managers and advisors be able to move on to discussing their particular products and services.

Building a Team To Keep the Industry Moving Forward

by Steven

Over the last year, many investment managers have lost almost half of their operating revenues, creating a devastating cost structure. This has forced companies to take a hard look at how to overhaul their current business models. As such, kasina has been looking for someone who can work with us to continue to help our clients through this tough time.

We are very excited to welcome Eric Daugherty, our new Resident Intellect/Research Director, to the kasina team. We spent a long time looking for the right person for this position - someone who can draw on a deep understanding of industry fundamentals in order to imagine new, improved business models and help our clients to weather these rough times. We're confident that we found that in Eric.

Eric has 15 years of experience in business unit leadership, financial advice services, strategic planning, and financial analysis. He was a Principal at The Vanguard Group, where he led the Advice Services Group (an experience that will prove to be invaluable as kasina reexamines how firms sell through financial intermediaries). He also has a background as a strategic planner and as a senior manager of several finance groups.

I've also been impressed by Eric's commitment to his community. He's passionate about financial literacy among students and young adults and he works regularly with Junior Achievement, the Financial Planning Association Pro Bono committee, and with local school districts.

Everyone at kasina is looking forward to getting to know Eric and his family, and is excited about the prospect of working with him to revitalize the industry in a positive and forward looking way.

Embracing Change: If I can Twitter...

by Deb

For all of you that have received hundreds of emails from me over the years, you know that I am sold on the benefits of email and the cutting-edge technology of my Blackberry. However, as the newest member of the kasina team, probably the least tech savvy and certainly the least likely to figure out my own iPod, I have spent a lot of time getting up to speed on many new Web 2.0 technologies. I am learning a totally new vernacular including such new buzz words as: Skype, Twitter, IM, wiki, etc. "What are these tools and how could they possibly help build relationships?", I thought to myself. At first blush, it seemed counter-intuitive to me that any technology could enhance the value of human contact. How could you replace the value of the face-to-face meeting or the phone conversation?

At kasina, we are spending a lot of time focusing on the ideal balance between external, internal, hybrid, National accounts, and Web touches for an asset manager - a formula that reduces costs yet maximizes the asset gathering proficiency of your advisors. The Web, and Web 2.0 tools, are proving invaluable to asset managers - oh, and to me too. Many of these new tools, which initially seem impersonal, are exactly the opposite - they enhance your connections and lower your costs. For example: sitting on an hour-long teleconference call will challenge anyone's attention span. Attending the same call via Skype is an entirely different experience, and one that is much more productive. The attendees are engaged in the meeting and can see the always-valuable facial expressions and body language of the other attendees.

My advice for wholesalers on the road? Start out using Skype to keep in touch with your family. Then imagine how useful it could be with your customers too.

So your next "email" from me may come on Facebook, LinkedIn, or even Twitter. If I can do it, so can your wholesalers.

Bad Bank Podcast

by Corianna

This weekend, while cooking soup for the kasina Soup Collective, I played podcast catch up, and came across an interesting take on the financial crisis produced by Chicago Public Radio. It was a worthwhile 50+ minutes because:

• It's a well-done podcast (click here for other well-done podcasts); an example of what asset managers should be providing for advisors and clients. If you listen, you'll see that the producers manage transform opaque issues into something:
  1. Accessible
  2. Entertaining
  3. Personal
  The tone is realistic, but also kind. It leaves the listener informed, but not hopeless or panicked.
• I learned something new; you might too. Among other things, the podcast makes an interesting point about bailout money and the current crisis: given bank balance sheets, banks might be right to be weary of dolling out dollars to prospective borrowers.

Irrationality and Investor Decision Making

by Corianna

Check out Dan Ariely's presentation (see this link; you have to select Ariely's name from the "video" dropdown). And no, this isn't just because he's on faculty at my alma mater.

Here's why Ariely's presentation is worth 20 minutes of your life: Ariely's work is about human decision making - the driving force behind our economy, and the current economic crisis.

In his presentation Ariely describes how people's decisions are affected by the structure that their options are presented in. For instance, in one study researchers found that, when confronted with a simple decision - delay a scheduled surgery to see if ibuprofen would solve the problem, vs. perform the scheduled surgery - doctors are likely to act "rationally," and chose to delay the surgery. However, when the decision circumstances become more complex - delay the surgery to test for the effectiveness of ibuprofen and an additional medication, versus going ahead with the scheduled surgery - doctors chose not to delay the surgery.

So, why does this matter to asset managers? The key to surviving this crisis will to understand and anticipate investor decisions, which are not always rational. It's a well accepted fact that the structures of 401k plans (for instance, automatic enrollment), have a dramatic effect on levels of participation and the quality of investment decisions made by participants. Now is the time to take these lessons further.

The Emergence of a Global Regulator and Why It Scares Me

by Lee

I hope to see a model of global financial oversight based on better coordination as opposed to the idea of a single global financial services regulator. Like Paul Volcker, I am concerned about the amount of power that central banks, treasuries, and regulatory agencies have acquired while trying to contain the global financial crisis. The trend towards bank "nationalization" has my anti-big government Spider-sense tingling. Unfortunately, with politicians like UK Prime Minister Gordon Brown and Germany's Chancellor Angela Merkel calling for a global regulator of the international financial system, I am afraid that we are getting well past the time when the financial services industry can come up with an effective system of self-regulation, or at least local regulation.

The key problems that I foresee with a single global financial services regulatory regime are:

• National Preferences: Countries at different levels of development will have varying preferences for how much risk they want to encourage and should have the ability to act on these preferences.
• Political Concerns: I don't see a true global regulator (one that has "teeth") being a political feasibility as it would require all major countries to participate and to respect. Specifically, I don't see Russia, China, and the United States agreeing on a regulatory framework (let alone all of the other markets). Even the EU governments, despite their positive public stance on the issue, are still struggling with countless regulatory and policy issues (e.g. whether to bail out Eastern European members of the union).
• Lowest Common Denominator: If all parties are somehow able to agree on a set of regulations, they are likely to be a lowest common denominator set of rules. By having every company regulated under these rules, another financial crisis becomes more likely, not less. As in farming, a monoculture is very susceptible to a single disease, which can sweep through and decimate it. A polyculture, though, is more resistant to a disease, and a disease outbreak will not result in catastrophic crop failure, but a partial and much more localized one.

That said, I do begrudgingly recognize the need for increased oversight. Instead of a single regulator, however, I support increased international coordination (as recommended by the Group of 30). As Volcker said last month, "the more international agreement we have on where we want to get to, the better off we'll be." I would love, for example, to have the Bank for International Settlements (or some other such organization) evaluate and grade local regulatory agencies, allowing local regulators, organizations, and investors to better understand their exposure to risk. Local regulators must work more closely with each other while retaining their own autonomy. In this model, the best practices will naturally emerge as global standards, rather than being decided from on high.

If you are looking for another Bretton Woods conference and more global organizations like the World Bank and IMF to save the global financial system, I think that you are barking up the wrong tree - I suggest that you read "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism" and then give me a call.

Case Study Challenge Lessons

by Johanna

Last week, kasina hosted its 3rd annual MCG Case Study Challenge in coordination with the NYU Stern Management Consulting Group. This year we had a record participation rate with over 12 teams (and a total of 48 students) facing off during the competition.

The case this year focused on issues of corporate social mission, economics, and employee morale. We invited student teams to our offices where Lindsay Geimer, Corianna Sichel, and I spent time with each team to talk through the case and answer their questions. Mike McLaughlin and Anu Heda judged the final competition where 4 finalist teams presented their recommendations for 15 minutes.

Times are hard in our industry, and sometimes its tough be optimistic about the future. However, taking the time to interact with the creative and ambitious NYU students was truly invigorating. Their enthusiasm for analyzing problems and devising potential solutions reminded me of just how fun my job as a person in the business world is.

Overall, the presentations of the 4 finalist groups were excellent, and reminded me of a few presentation best practices that can apply to many work situations:

• Communicate a clear agenda: At the beginning of a meeting or presentation, let your audience know the goals of the meeting and the steps the group will take to accomplish those goals.
• Practice makes Perfect: During the competition, it was obvious which groups had practiced ahead of time. Knowing the content on the next slide and having smooth transitions between presenters were things the winning team did seamlessly. At kasina I often present to an empty conference room just to practice speaking out loud, which helps me ensure I'm hitting the key points and smoothly transitioning between ideas.
• Make Abstract Concepts Substantial: While many of the competing teams recommended that the theoretical company engage in product development efforts, only one effectively illustrated the concept using examples of potential products. Use hypothetical or real examples to demonstrate abstract concepts so your audience understands your recommendations in a tangible way.
• Conclude: Even the presentation attendees who are paying close attention will have trouble distilling all the information from a 15-20 minute presentation. The conclusion is a crucial time for the meeting leaders to reiterate key takeaway points. A strong conclusion leaves everyone in the meeting feeling like they have a clear idea of what was addressed and a good sense of action items for the future.

While there's nothing like a competition for prizes and bragging rights to make sure you polish your presentation skills, many of these points are pretty simple but make the difference between an OK meeting and a great one. Thanks again to all the case study challenge teams for participating!

Follow kasina on Twitter

by Aidan

There's been a lot of hype lately about Twitter, both in our office and in the media, so I started doing a little background research: What is it and where did it come from? Who uses it? What on earth are all those symbols (#, @ what?), acronyms (RT...?), and new words entering the Twitter vernacular (...twanacular)? Better yet, why does anyone care what I, personally, have to say (in 140 characters or less)?

There is a plethora of available articles and blog posts that explain Twitter's advantages for businesses, along with videos that discuss how, exactly, your firm can best optimize its Twitter account.

In short, there's one thing for certain: Twitter is leading the way to better, faster, more concise interactive communications. (Forget that "all@" e-mail to everyone on your team; instead, just invite them to #FridayLunch on Twitter.)

Don't just take my word for it: get first-hand experience by following @kasinaUS. You'll be among the first to know about podcast and blog publications, research and roundtable updates, as well as tips and interesting industry facts.

How Investment Management Firms Will Make It Out of the CRISIS

by Steven

Every day we are hearing more bad news about the state of the economy, and not knowing what is going to happen is killing everyone. Most firms have gone into crisis mode and are cutting back on any long term growth plans. But there is only so much that you can gain out of cutting cost. At some point you have to start to innovate to get ahead. Only the firms that are going to start acting towards the future are going to have a chance to get out of this crisis.

Here are three principals that we adopted from Lee J. Colan, Ph.D, on how to take advantage of a crisis and use it as an opportunity to strengthen the core of the business model and set yourself up for future success.

He breaks responses to a crisis into three categories:

1. Survival vs. Opportunity
2. Control vs. Involvement
3. Panic vs. Focus

He highlights the different types of leadership reactions and their outcomes:

Staged Mourning and the Asset Manager Marketing Challenge of 2009

by Corianna

In her 1969 book On Death and Dying, Elizabeth Kubler-Ross identified five stages of mourning:

• Denial
• Anger
• Bargaining
• Depression
• Acceptance

A notable study, done at Yale in 2007, challenged Kubler-Ross and found the cycle to be denial, yearning, anger, and depression. It notes that acceptance--the final end state--increased throughout the mourning process.

Either way, I've recently noticed a growing number of angry, let's-take-revenge-on-Wall Street headlines. It seems like the initial shock and panic are slowly morphing into anger. As this continues, calming panicked clients will no longer be as pressing as it was four months ago. According to mourning stage theory, anger, frustration, and depression will trump shock. Advisors and asset managers should prepare to deal with consternated, blue clients. And, for asset managers, the marketing challenge in 2009 will be developing campaigns that appeal to clients at all stages of "mourning."

Welcome Deb Wetherbee

By Mike Ma

Although it has already been covered by MF Wire and Ignites, I wanted to offer Deb Wetherbee a warm welcome here on the kasina blog. I have known and admired her from afar for a number of years, and I am so glad that she is part of our team.

If anyone else would like to drop her a line she can be reached at 917-595-0677 and also at dwetherbee [ a t ] kasina dot com.

Again, welcome Deb!

Twitter for Asset Management, Are You Kidding Me?

by Steven

When I first heard about Twitter - an online tool for instantly sharing short updates and following others who do the same - I wondered who would ever want to do that, and thought it would be a waste of time. But I've been testing it out for a while now, and after listening to some of the discussions at our recent e-business roundtable, I reconsidered, and realized it could be a great internal tool for wholesalers and national accounts managers.

How Does Twitter Work?

Twitter users have 140 characters to answer the question, "What are you doing?" If you join Twitter you can "follow" others who also post. You can also direct message them, but always in 140 characters or less. Twitter interactions can be viewed and updated on the Web, through desktop apps, and on mobile devices. It's a way to quickly share information without having to send mass-emails.

Twitter for Wholesalers and National Accounts Managers (NAM)

Simply speaking, Twitter is a communication tool. Wholesalers frequently talk or email each other about successes they had with an advisor or a fund that they tried to promote. Rather than sending these successes as a long sentence or comment in the header of the email - I know you guys do that - wholesalers and NAMs could use a tool like Twitter to post these successes and follow them throughout the day.

The advantages of Twitter over email are:

• Every wholesaler in the organization has access to it


• Stored in a central location


• Searchable for future reference


• Limited to 140 characters to ensure concise messaging

If you're still wondering whether asset managers would really find this useful, I would suggest testing it out. This quick and easy service could provide a leg-up for the next generation of successful and progressive wholesalers and NAMs who depend on networking and the internet to facilitate communication.

Never Allow A Crisis to Go to Waste

"Rule one: Never allow a crisis to go to waste" - Rahm Emanuel

By Steven

The industry has already lost $1.3 trillion in assets under management in the first three quarters of the year. Distribution teams are responding by cutting the bottom performing wholesalers. Organizations are taking this opportunity to reassess their wholesaler territory strategies, and focus on understanding the difference between overall territory potential and the actual impact of the wholesaler. Understanding this difference is fundamental to a successful wholesaling strategy.

To better assess territory and wholesaling potential, we recommend that firms:

• Acknowledge that the territory and the wholesaler are not one and the same - 50 percent or more of incoming assets within a given territory may be derived from advisors that the wholesaler has never actually engaged.


• Apply more rigor to the analysis of wholesaling opportunity - Firms can incorporate information from National Accounts and supplement it with data from outside vendors, such as Coates Analytics, IXI, and Discovery Data.

Once firms understand the underlying potential of their territories, they need to improve upon how they evaluate their wholesalers. We found that the following steps lead to success:

• Compensating for wholesaler alpha - Pay wholesalers for lower-than-average redemptions in their territories. This can be done simply by taking the average redemption rate for the firm and paying wholesalers that have fewer outflows then their peers.


• Matching the wholesaler evaluation metrics to the sales goal so that both are grounded in wholesaling potential - Separate assets derived through wholesaling contact from those acquired without wholesaling contact. Pay only on the assets that wholesalers influenced.

87 percent of Sales managers do not know the percentage of assets coming in through a given territory that results from the efforts of wholesalers. This is often the cause for underperforming Sales teams. Take advantage of this crisis by redesigning your territories, and reevaluating the way you measure and compensate your wholesalers.

Today, I Am Complaining Like It Is 1999

by Anu

So here we are at the 2008 NICSA Technology Summit and there's a message that hasn't changed. For me, it's the same message I remember hearing when I worked in IT at a major investment bank.

We can't connect all the systems with disparate data and make sense of it all. Wow, flashback. I thought that the pervasive network, XML, middleware, business intelligence - weren't all these going to connect different data systems? Ten years later and we're still having sessions and 2-hour lunch conversations about this?

But then it struck me: IT professionals will always complain about these things. Why? Job Security. We need to change the paradigm by asking important business questions and looking to IT for reproducible methods to answer those questions periodically.

I asked an important one of many attendees, receiving mostly blank looks: Can you tell me, of the advisors that logged in to your Web site last month, did any drop a ticket for a previously unheld fund?

Barack Obama the Best Choice for Our Industry

By Steven

Without a doubt, our industry is in turmoil. But the threat doesn't come from a small tax increase. It is much larger than that, and much more immediate. The real threat is applying the short-term fixes proposed by Senator McCain when we are facing a vast recession and our financial system is in the throes of a fundamental shift that will alter how it is structured. Simply put, much more is needed than what the McCain campaign is suggesting.

Economists say that we've lost 200,000 jobs in October alone, and the bleeding has been virtually indiscriminate. Companies as diverse as Yahoo, Merck, Goldman Sachs, Bank of America, Coca-Cola and Chrysler have all been hit. These are not only assembly line workers, but also white-collar professionals with 401(k)s and investments. In other words, this is directly affecting our clients.

We need a president capable of tackling these challenges head-on. Barack Obama has already started to assemble a credible and experienced economic advisory team that is centrist and non-ideological. That team includes Robert Rubin, Paul Volcker and Robert Reich. This talent will ensure a functional capitalism with full transparency in all investment vehicles, without overregulating the market.

These unique and frightening times force our industry to take a thoughtful look at who will lead us to a better future. Obama has shown that he is a pragmatist who will weigh every issue individually and will not be bogged down by liberal demagogy. One of the fundamental industry shifts is the increased importance of emerging markets, specifically the BRICs and the Middle East. Our stature throughout the world has been greatly diminished, making it harder for America to wield the kind of influence needed to secure our prominence abroad. As an industry, our global expansion is paramount to our success. Fortunately, Obama has engendered great admiration across the globe, offering the best chance for a restoration of American soft power, the precursor for continued economic preeminence.

Obama has also been able to inspire people from both sides of the aisle. Colin Powell, former Iowa congressman Jim Leach, former Massachusetts governor William Weld and former National Review columnist Christopher Buckley have all endorsed him. His ability to unite will continue to inspire the nation in this difficult time.

In order to restore the American economy, we must elect a leader who will position this nation for broader structural prosperity. Our industry has largely tapped the nation's top earners, so our success is inextricably tied to America's ability to create wealth among a greater swath of the population. We must therefore elect a leader who offers the best chance of reshaping the American economy for decades to come.

From Many Come Ten

by Anu

This month, kasina released "Top 10 Institutional Web Sites for Institutional Investors." In our first review since 2006, the data revealed significant progress. Then, many firms maintained a one or two page brochure about their institutional line of business. Now, our research revealed three key findings:

• Institutional clients and consultants expect the ability to access data on-line. EXPECT. This is no longer a nice to have, but an expectation
• Institutional web sites will play a role in winning RFPs both today and in the future
• Institutional web sites will only be successful if the relationship management is well-trained and ready to direct users there.

There is tremendous discrepancy within our Top 10 sites. The 10th place firm scored 52% of the top firms. Therefore, there is significant opportunity for other firms to jump right into the foray and place in the next ranking.

In the high-tough, high-margin institutional business, firms are creating a world-class client experience to compete and win business. Winning one additional small mandate (e-mail me for the math) results in over $1MM of revenue.

E-mail us with questions or thoughts about the institutional client experience. Or better yet, use the kasina forum to post thoughts and questions.

Blogging from the NICSA Technology Forum

by Mike Ma

Anu and I are blogging from the NICSA Technology Forum and are posting our thoughts there for the next couple days.

I realize that travel has been tightened, but it's my hope that readers of the kasina blog can tune into what is going on real time over there.

Comforting Conversations

by Corianna

According to a very smart consulting firm, right now asset managers' market messaging is all about buoying confidence and refocusing investors on the long run.

These marketing campaigns are essentially conversations. To gain some insight into best practices around calming conversations, I called a clinical psychologist with over 30 years of experience.

Here's what he said:

• Make sure people feel heard: firms need to keep communication channels open, and find ways to show advisors and investors that they are listening.
• Engage the panicked party in the solution process: communicating the "trust us" message is necessary, but not sufficient. Asset managers should help investors and advisors understand what's going on at the product, firm, and market levels. Transparency is key.
• Close with an action plan: Don't just reassure. Market messages should leave investors and advisors with a clear idea of what they should do, which -- in most cases -- is to remain invested.

Cents Ability Volunteer Teaching Opportunity

by Lindsay

For the past several years, the kasina Youth Foundation has partnered with a New York-based non-profit called Cents Ability, whose mission is to teach the fundamentals of personal finance to underprivileged New York City high school students. Cents Ability volunteers teach six-to-eight session classes at high schools in Brooklyn, Manhattan, and Queens, covering such topics as goal-setting, budgeting, credit, and investing.

kasina sees teaching financial education as a great way to give back to our community by sharing knowledge and expertise that we already have. By teaching a high school junior how to set up a budget, open a checking account, and map out a plan to pay for college, or by helping a high school senior understand how to distinguish between various credit card offers, and use his or her first credit card responsibly, we provide them with valuable skills that they will use for the rest of their lives.

kasina has a group of trained teachers who usually teach a few classes a year, but this year we're hoping to get some of our New York-based clients involved as well. Teaching requires a minimal time commitment (~2 hours of training, plus 8 hours of teaching for a typical class), and is a fun, rewarding experience. Fall classes are starting up over the next couple of weeks, and there are many teaching opportunities available. If you are interested in teaching, or in learning more about Cents Ability and how you can get involved, please e-mail me at lgeimer@kasina.com.

Can Washington Bring Confidence to the Market?

by Steven

I have never experienced a depression and I can't imagine what it would be like to have double digit unemployment and inflation. For the first time in recent years, we are facing the possibility that these things might become a reality. There is a possibility that the bailout will not work. Banks might not be able to sell their bad mortgages and will not be able to lend to each other. The system might just have to work its way out of this, but that could involve unavoidable casualties that would be really ugly for the general public.

I do know that there needs to be confidence in the financial system for it to function properly. Right now that is not the case. Washington has to do their share to provide confidence.

Thomas Friedman had a good op-ed in today's New York Times appealing to congress to get their act together. I have pasted some of it below for the full article click here.

"I've always believed that America's government was a unique political system -- one designed by geniuses so that it could be run by idiots. I was wrong. No system can be smart enough to survive this level of incompetence and recklessness by the people charged to run it.

This is dangerous. We have House members, many of whom I suspect can't balance their own checkbooks, rejecting a complex rescue package because some voters, whom I fear also don't understand, swamped them with phone calls. I appreciate the popular anger against Wall Street, but you can't deal with this crisis this way."

"I always said to myself: Our government is so broken that it can only work in response to a huge crisis. But now we've had a huge crisis, and the system still doesn't seem to work. Our leaders, Republicans and Democrats, have gotten so out of practice of working together that even in the face of this system-threatening meltdown they could not agree on a rescue package, as if they lived on Mars and were just visiting us for the week, with no stake in the outcome."

Most of us have only lived in a time of great prosperity, never having to experience the realities of an economic depression; let's make sure that we don't have to experience the unimaginable.

What the Jets Can Teach You About Staffing

by Lee

I became a fan of the New York Jets when I moved to NYC in 1996 (the year the Jets went 1-15) and after 12 years, they've taught me an important lesson about hiring/staffing. Being a Jets fan, I've learned a lot over the years: how to temper my expectations (their only Super Bowl was following the 1968 season), what it feels like to have someone you trust stab you in the back (see Belichick, Bill), and what it feels like to have the competition cheat to get ahead (again, see Belichick, Bill).

But there is hope in Jet-land and a lesson that can apply to every organization. During this past off-season, the Jets spent $140 million to sign Alan Faneca, Calvin Pace, Damien Woody, Tony Richardson, and others. Then, the Jets made the boldest personnel move in franchise history, acquiring the legendary Brett Favre from the Green Bay Packers to replace signal caller Chad Pennington. Whether these moves will ultimately pay off with the team's first Super Bowl in 40 years is still to be seen (Sunday was a good start against Miami), but the Jets management made smart moves that few other organizations have proven willing to make: replacing a number of solid, run-of-the-mill performers with All-Star caliber talent.

Many teams within asset management firms are filled with well-intentioned, but unspectacular people (think Chad Pennington) that are capable of leading the organization to middle-of-the-pack performance.

Is that good enough for your firm? If you are looking to grow faster than the competition, win the biggest institutional mandates, or get the best shelf space, you need to find the All-Star players. Whether you develop these All-Stars in house, or bring them in from another team, it is no longer enough to have nice people that try their hardest. For most firms, the time is now to upgrade your roster if you want to be around in the "postseason." While history has typically proven otherwise, I expect the Jets to be there with you -- go J-E-T-S, Jets, Jets, Jets!

Rest Well, Robert Hughes

by Mike Ma

It is with a heavy, sad heart that I am writing to inform friends of kasina that Robert Hughes has passed. We knew him as Robert Larson-Hughes, as he was a Principal of the firm and also has served on our Board of Advisors after he left us in 2005.

Anyone who has been to our office should feel his presence. In addition to a number of other things I'd like to talk about below, he designed our office space.

Larry Cecil of Van Kampen paid us one of the best compliments that makes me think of Robert. Larry said, "This is exactly what I thought kasina's offices would look like."

Of course. It was designed by my friend, Robert Hughes.

In his short tenure with us, he left an indelible mark on our firm and me personally. I credit him with a lot of what I know about consulting and business. He challenged me on improving our process across the board for our clients. I still can hear him repeat one of his favorite Robert-isms, "All we sell is a process. So it better be good."

However, if I limited his credits to that I would be doing him a great disservice.

He taught me the value of surrounding yourself with a vibrant, passionate community. He was previously Steven's boss at McGladrey and came to work for his former employee because he thought Steven would stimulate him the most. He didn't need the money. He wanted to be in New York for personal reasons and wanted to be challenged. He thought we were the best fit. I don't know of many people whose pride would take such a back seat to his commitment to passion, learning, and community.

As I mentioned earlier, he also impressed on us the value of physical space. An MIT-trained architect, Robert graced us with his ingenious eye. If you have been here, you will realize that he placed a premium on community and elegant simplicity. He was a noncomformist who was savvy enough to conform when appropriate. He was a master of working with what was there and making it better.

All the things I love about kasina in our office. All Robert.

As you may see, I always sensed a kindred connection with him and it was solidified when he chose to move to Vermont after leaving us, not more than a few miles from me. It afforded me the luxury of seeing him more often than most others here at kasina. For that, I am grateful.

Robert, we will miss you.

Please hug your loved ones extra hard tonight. I know I will.

IT Credibility

by Johanna

When it comes to the expertise needed on e-business teams, skills that come to mind immediately include:

• Understanding of the business
• Liaison with sales
• Writing for the web

Absent from this list is IT expertise. e-Business teams today do a balancing act between Marketing and IT, and many are closer to marketing than they are to IT. Some could even be called Web marketers, not technical Web developers. The implementation aspects often fall to IT, and e-business focuses on having a good relationship with IT.

What does it mean to have a good relationship with IT? kasina has spent the past few months envisioning, developing, and implementing a Web forum where our clients post questions and engage in a dialogue with each other, and with us. As an observer of the building process for the forum, I gained a new perspective on the development process needed for the Web.

Within kasina we have computer science degrees, IT backgrounds, and on-the-job experience in dealing with the nitty gritty of technical Web site development. Personally, I have a background in finance and economics, and on-the-job experience in strategic planning research and consulting, which means I have little credibility with IT and Web developers when discussing time and effort. For example, when our outsourced IT partner quoted 3 days to enhance the forum, it was extremely valuable to have a colleague who knew that the changes should only take 1 day (actually, it should've taken 20 minutes). "A good relationship" with IT, coupled with a more in-depth knowledge of the technical aspects of the Web, meant that he could call them back and demand a faster turnaround.

While e-business still needs to answer to the business units and senior executives, and should avoid doing technical implementation better left to IT, having expertise on e-biz teams at both a strategic level and a technical level would allow the group to better succeed in the balancing act.

Eating Our Own Dog Food

by Lindsay

kasina has been talking for years about the rise of online social networking and Web 2.0. We've recommended that asset managers create venues for advisors, individual investors, and institutional investors to communicate about their experiences, share advice, and ask each other questions. We've pointed to the medical community, which has Sermo, an online network for physicians, supported, in part, by Pfizer.

But what about kasina's clients and other professionals in the asset management industry? Where can they go to share best practices, solicit advice from their peers, or ask questions about pressing e-Business and Distribution issues in the industry?

Starting today, they can visit the kasina Web Forum. kasina developed the Web Forum to give our clients a means to continue the types of conversations that happen at our Roundtables, and keep the dialogue open on an ongoing basis. The Forum is open ONLY to the industry, so registered participants won't have to worry about press or vendors trying to sell to them.

When users sign up for the Forum, they'll be able to:

• Post new topics and questions, or add replies to existing conversation threads
• Send private messages to other Forum members
• Create a profile and view the profiles of other members
• Search for specific topics or members

The Forum is still in Beta, and kasina is actively soliciting feedback from members so that we can work on improving it to meet the needs of our clients. Try it out and let us know what you think!

kasina Talks Smack

by Jessica

Things I never thought I would hear kasina team members say to each other:

"I desire that we be better strangers."

"Hell is empty, and all the devils are here."

And of course, the succinct but effective, "Peace, ye fat guts!"

We were hurling insults in my latest book report, an investigation of how to best say what you mean and mean what you say. How is a performance persuasive and what makes a dialogue productive? How does Much Ado About Nothing apply to, say, consulting? With a little help from John Barton's, Playing Shakespeare and Cicely Berry's The Actor and The Text, we spent an hour exploring some of the great Shakespearean snippets, as well as his seemingly endless supply of jabs and barbs.

It seems an odd way for a consulting firm to spend a Friday afternoon, but there's a lot to be learned from being nitpicky about the Bard's text. Shakespeare's vocabulary numbered over 17,000 words and he invented just under 1700 of those himself -- all of which we now use in modern conversation ("advertising", "radiant", "fashionable" and "compromise" are all of his invention). In the entirety of his work, he managed to use over 7,000 words - more than occur in the whole of the King James Bible - only once and never again. He knew exactly what he wanted to say, and precisely how he wanted to say it.

The vowels, consonants, alliteration, assonance and the syllabic structure of the lines themselves are clues that we use to discover their meanings and the ways in which they should be spoken aloud.

All of this textual study brings us, finally, to a place of performance. When performing Shakespeare (or any playwright), two truths become evident: You have to know what you are saying and you have to listen (even when the only lines assigned to you are Elizabethan trash talk).

Knowing what you are saying is fundamental, but often overlooked in performance, in business and in life. It means that you are equipped to speak passionately to your point, it means that you understand both the literal meanings of your words and their ultimate implications, and it means that you are working towards something active. You are informing, you are hurting, you are comforting, and you are inspiring.

Listening is the linchpin. It's in the listening that the actor achieves greatness, that the presenter makes a lasting impression on her audience, and that the acquaintance becomes a fast friend. In acting, you're in a dialogue -- with yourself, with the audience, or with a partner. In a vacuum, you might perform beautifully without listening. Give that same isolated performance without taking your cues from a partner on stage or listening to your audience, and your words ring false, flat, or just plain fail. Try giving a pre-prepared inspirational speech or reprimand to an employee without listening to their concerns, explanations or reactions, and you will lose them in your first few sentences.

In my most recent acting class, an instructor told us simply: Writing is acting is life. It's an equation that works for consultants as well as artists. You have to understand what you are saying in all of its complexity. Then you have to listen in order to learn the most effective and far reaching way to say it. Illuminating is consulting is life. Service is business if life. Motivating is public speaking is life.

Mainly, though, the book report was just Shakespeare and more Shakespeare. After all, there's only so much you can do in an hour. My kasina team members humored me and my obsessive enthusiasm for the complexity of speeches like the Chorus' opening monologue from Henry V.

Of course, patience has its rewards. Once we had worked on the famous speeches, we moved on to the Shakespearean insults. There's nothing more cathartic than listening to a coworker who has investigated what he is saying, how he is saying it, and what affect he wants to have on his partner, then cry out, "More of your conversation would infect my brain!"

His partner considers this, takes it all in, and finally responds with, "What a disgrace it is to me that I should remember your name."

Atlas Shrugged

by Johanna

Whether I was riding the subway, in an elevator, or even standing in line at the grocery store, the sight of Ayn Rand's novel Atlas Shrugged peeking out of my bag incited more comments from complete strangers than I'd ever experienced. Whether it was positive or negative, the sight of the title and distinctive graphic on the book cover received strong reactions from people who had read the book.

Whether or not you agree with Ayn Rand's philosophy, Objectivism, chances are that if you've read one of her novels (the two most famous are Atlas Shrugged and The Fountainhead), she's made you reconsider your view of how society should work.

Most of the Objectivist theory flows from the idea that "man is an end in himself, not the means to the ends of others." In Atlas Shrugged, Ayn Rand rejects the idea of "charity," and posits that societies who force individuals to give to the needy will ultimately fail. Objectivism rejects government policy that results in wealth redistribution, because it "punishes" individuals who have worked hard for what they've earned, thus draining the life from society's most productive members.

This book sparked an interesting discussion at kasina because most of us had already read and formed opinions about Ayn Rand's philosophy. The kasina culture is one that is very pro-giving, pro-charity, pro-assistance; however, we also operate in the private sector that benefits from many capitalistic freedoms. While no one fully agreed or fully rejected her theories, Ayn Rand's ideas provided good fodder for philosophical debate.

It Does Not Just Grow On Trees

by Michelle

While my memory is vague, I seem to recall getting an allowance as a kid, ranging anywhere from $3 - $10 dollars a week, hopefully increasing as I got older. I do not remember this allowance having any correlation to chores, or that it connected to lessons on spending, budgeting or saving. What this probably means is that I was spoiled and am now financially doomed. In a quick office poll on this subject, only one person talked about how her parents offered her financial options regarding different ways to smartly manage her $5 a week. (Her mother is an accountant.) Another person described getting a "mall" allowance. (She's from Southern California.)

But really, how do we impart basic financial knowledge to kids, both younger and older?

A few kasina team members have been teaching with Cents Ability, an organization that provides high school students with basic finance classes so they may work towards achieving their goals through informed money management. Topics covered range from goal setting, to creating a budget, how to pick a credit card, and introductions on the stock market and investing. It is a worthy and no doubt challenging endeavor. Math classes, and less frequently, accounting classes are the only way in which students might gain exposure to finance issues, but this is neither as direct nor explicit as what a class specifically on money management would offer. Cents Ability attempts to bridge that learning gap. A related and helpful Web resource for this question is Education.com. The site offers parents and educators a wide spectrum of information, including articles on:

• How to teach money management
• Understanding the cost of living
• Tips to foster financial literacy in kids

These links provide useful tips on how to help kids understand how we save to spend, compartmentalize and manage our money. As the adage goes, it doesn't just grow on trees.

27 up, 27 down

by Tricia

So here I am on the uptown 4, and what do I see from the El? Yankee Stadium and... Yankee Stadium. The House of Ruth and its progeny, side by side, like stalwart father and son.

Here I am with a watchful eye on Joe Girardi, feeling like Joe Torre has the map of Brooklyn on his forehead and has no business out in the land of Royal Palms and Sunkist oranges - but as the line goes, I haven't been happy since the Dodgers left Brooklyn. And if Jorgito's out for the whole season, I can cancel my cable.

Baseball puts me in a state of ecstatic bliss, but it also makes me think about what makes somebody great at what he or she does. I read a quick piece from the Times the other day about what makes Alex Rodriguez so good:

Turns out, beyond his considerable natural talent, he sets goals for himself and pushes himself to meet them. He practices hard and regularly. He persists. Through the doing of these things, he improves. He discovers his strengths and weaknesses and adjusts and learns accordingly.

These are the same things that go into great research.

Great skill doesn't come in dramatic cathartic bursts, although that makes for great theater. It comes through persistence, humility, the willingness to fail and learn. Research is a skill, not unlike batting, pitching, throwing, catching.

How do you get to be great? By doing. There is no other way. You can't talk your way to Carnegie Hall, and you can't think your way into the post-season. You have to show up.
Any novelist will tell you that they threw out half a million words to arrive at the 80,000 or so that ended up in front of you for $12.95. Half a million words. Ask Henri Matisse how many canvases he went through before he got a Moroccan curtain that wouldn't make him puke.

Sometimes I'll have a client say, "Oh, look, we're making money hand over fist; there's no good reason to do anything else." On the one hand, I could see the guy's point. The asset management industry's been having a good, long run; we pull down margins unheard of in other industries, even within other parts of financial services.

On the other hand, I wondered what would happen if Johan Santana, Derek Jeter, and Albert Pujols all decided that they weren't going to show up for practice today. Because after all, their numbers are so good, even among their own peers, both on and off the field. So they'll just show up for work and do what they were doing yesterday.

How long do you think they'd last that way?

By doing nothing, you are betting that no one is doing anything either. You're betting that you're such a fast follower that even if your competitor rolled out a paradigm-shifting innovation, you could still catch up before that innovation made you irrelevant.

You're saying you'd rather react to an event than be the event.

I know the "don't fix what ain't broke" idea has its merits, but every time I walk past that giant, glaring FOR LEASE sign at the corner of Court and Pacific, I keep picturing the guys at Blockbuster sitting around huffing, "Movies by mail? Video on demand? That's idiotic! Where's my bonus?"

How Do We Know What We Know?

by Tricia

My line of work depends less on what I know than how I know it.

Yesterday I walked out my front door on the way to work, and I knew it was spring. Not because the calendar says so; because of independent, observable phenomena.

I live in a brownstone above a 24-hour bagel shop on a street that connects most of the subway stations in Brooklyn Heights to the Promenade. For you Manhattanites and other foreigners, that's the tree-lined walkway above the BQE and East River, rhapsodized by everyone from Walt Whitman to Spike Lee.

From the Promenade, you can see most of lower Manhattan, including the Staten Island Ferry terminal and the building my little sister works in, One New York Plaza. To the right is the Brooklyn Bridge; in front of you is the Statue of Liberty. Heading left from her torch, you're looking at New Jersey, Staten Island, and the Verrazzano Bridge. You used to be able to see the Twin Towers.

So, as I was saying, I'm on my way to the 2 at Clark Street, and this is how I knew it was spring:
There's litter on my stoop: sandwich wrappers, cigarette butts, and empty coffee cups. People are eating lunch on the stoop now. Spring.

The cherry blossom leaves almost obscure the litter on my stoop. Cherry trees only bloom this time of year. Spring.

The door to the bagel shop is propped open. Sammy, the Trinidadian guy who works the graveyard shift, doesn't do that until he's satisfied that it's a civilized temperature. Spring.

The double-wide strollers and the meandering tourists have begun to clot up my street, turning my neighborhood into a resort town. Spring.

And of course, the most important thing: my TV is on the YES network almost every day, carrying major league ballet into my living room. Batter up!

Peace Rocks

Next Monday, May 5, from 6 to 11 pm, Peace Games will host an exciting fundraiser at the Hard Rock Cafe in New York: Peace Rocks New York. The event will feature a "Battle of the Bands" featuring bands that all include representatives from a financial services organization: The Bang (Morgan Stanley), Invisible Men (Giuliani Partners), The States (D.E. Shaw), and Behind Closed Doors (Capital Rock Advisors). A celebrity emcee will oversee the program, which will include a cocktail party, raffle, live auction, and an opportunity to hear about the impact that Peace Games is making on schools and communities in New York.

You can find out more about it at www.peacerocksnewyork.com.

As you may know, kasina works closely with Peace Games, an organization that empowers students to create their own safe classrooms and communities by forming partnerships with elementary schools, families, and young adult volunteers. We believe so strongly in the effectiveness of their programs that our CEO, Steven Miyao, joined the board of directors of the New York City chapter and we have donated part of our office space to their New York staff.

kasina is also proud that one of the participating bands, The Bang, features client and friend Rich Brereton, who is Managing Director and Chief Marketing Officer at Morgan Stanley Investment Management.

If you are able to attend, this will be a great event - and you'll see a lot of kasina friends and family there, too.

Me and Louie on the Stoop

by Tricia

Sitting on the stoop last night, my next door neighbor, a retired Brooklyn Navy Yard stevedore, asked me, "What exactly is this globalization thing?"

"Louie," I said. "This is one of the great questions of our time."

He chomped on his cigar. "Do you know, or don'tcha?"

I said, "The Vlasic pickle stork dropped it off on Pier 81 in 1991. Where were you?"

He said, "The one that talks like Groucho Marx?"

I think it's funny that the financial services industry likes to market itself as a bulwark of change and immutability ("Get a piece of the rock"; "The company you keep,") when really, it was the prime mover for one of the biggest paradigm shifts in human history.

"Globalization started as a campaign to move more cash faster around the planet," I said. "Around when Ronald Reagan and Maggie Thatcher were in office."

"Hold on." He popped the tops off two Rheingolds and handed me one. "OK, go ahead."

In the early 1980s, the leaders of the three biggest capital markets -- New York, London, and Tokyo -- looked ahead and realized that their domestic markets would be saturated in 10-15 years. They began a campaign to deregulate banking for the oldest reason in the world: to expand their markets.

Almost twenty years later, they got their wish: the member countries of the WTO signed 1999 the Agreement on Banking and Financial Services. Prior to that agreement, most banks could only operate in their countries. Exceptions were few, far between, and expensive. (That same year Congress also repealed Glass-Steagall, the law that forbid investment banks and commercial banks from operating under the same roof. That's why Citibank was able to buy Travelers and Smith Barney or why JP Morgan could buy Chase.)

The fact that banks could now effectively operate across borders intensified the utility of things like 24-hour markets, e-trading, and currency consolidation. It made it easier, cheaper, and faster, to move money across borders: cheaper capital, bigger balance sheets, and more service options=more trade. More trade=more globalization.

"That's why," I said, "when I went to visit my sister in Paris in 1988, I had to take traveler's checks and dollar bills. Now I get on a plane with my passport and my debit/credit card and still get a better rate."

"That's crazy," he said. He glanced at my half-finished beer. "You gonna finish that?"

What To Do With Gen Y

by Steven

Over the last year I have had a lot of discussions with clients and kasina employees about working with Gen Y. Generation gaps exist for all generations, and the gap between Generation X and Y is becoming more and more apparent. One day, those of us in Generation X woke up and realized that we didn't understand our young employees anymore.

"I don't feel like doing this kind of work."

"I am really frustrated right now."

"Do we need to meet about this in person?"

Gen Y, which includes individuals born between 1979 and 2000, consists of approximately 76 million people, 20% of the overall population. They already represent 10% of our workforce -- this percentage will double by 2012.

Why then, do those of us in Gen X just sit here sipping our coffee and complaining that those in Gen Y don't know how to conduct themselves in a work environment, instead of taking the time to identify productive ways to solve these challenges? The fact of the matter is that outside of the Baby Boomers, Gen Y is the single largest segment of our society. We only have two choices:

1. Stick our heads in the sand and hope that Gen Y will go away
2. Adjust our organizations and inspire Gen Y to work with us

It is interesting to learn about why they are so different from us. Most of the discrepancies can be traced back to their baby boomer parents. Most of the Gen X parents are from the Silent Generation (born 1925-1942, now age 66-83) who told us that we would not amount to much unless we worked hard and proved ourselves. Baby Boomer parents, ensured that their Gen Y kids had every modern convenience, told them every day that they were special and that they were winners no matter what they did.

A client of mine actually received a phone call from the angry mother of an employee who wanted to register a complaint about her daughter's performance review.

This method of childrearing has resulted in Gen Y having different expectations of the office environment than we had when we started working.

Here are a few Gen Y traits that we, and others, have identified:

• They want their work to mean something personally and to be identifiably important to their company. They want to have a tangible understanding of how their tasks connect to the overall mission of their organizations.
• Traditional advancement isn't as important to them as feeling useful and having a meaningful experience.
• They are the confident products of encouraged self-esteem and educational opportunities.
• Friendship is such a strong motivator for Gen Y workers that they will choose jobs just to be with their friends.
• They are connected and technologically adept. They use cell phones and the Web as their primary means of communication.
• They believe that they can do it all.

I have started to understand that the key to working with Gen Y is to effectively cater to their unique preferences and needs. Here are some examples:

• They can be very loyal if their needs are met, but they are not unquestioningly loyal or intimidated by hierarchy. Gen Y wants to know they are compensated fairly for the work they put in.
• It's not precisely true that Gen Y doesn't want to do "grunt" work. They actually don't mind it as long as they know why they are asked to do it and how it contributes to their personal or professional growth.
• Many Xers complain that Yers require too much praise. They do want praise, but we are responsible for setting expectations and guiding them appropriately toward the objectives that the company has set for them. Often times their priorities are misaligned with the company's priorities for them, and that leads to miscommunication and the feeling that they are being unduly criticized.
• We try to give our employees flexibility. For kasina, and for Gen Y, it is more about the total output than about where and at what time the works gets done.
• Gen Y feels special and they want to have personal responsibilities. This means that every employee needs to have their own goals and metrics for success.
• We need to be more successful in laying out a clear sense of where they can go in the company, how they can get there, and what they will have when they arrive. By laying out this clear path, Gen Yers are more likely to buy into the objectives of the firm.
• We work hard not to treat them as if they don't have the necessary experience. We have learned that honesty and directness is what they value most in us.

It is not just that the Gen Yers have to adjust to us. We need to adjust to them too.

Alexander Hamilton, Bad Samaritans, and the Need to Challenge Conventional Wisdom

by Lee

Since I've started watching the "John Adams" mini-series on HBO, I've become more interested in reading about the real stories behind the founding of the United States. This Sunday's Part 5 finally introduced us to Alexander Hamilton, the first Secretary of the Treasury. Hamilton was one of the more intriguing characters I read about in Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Ha-Joon Chang, the book on which I did my most recent book report. In 1790, Hamilton introduced the "infant industry" argument for protectionism. The policy (that nascent industries do not have the economies of scale to compete without protection) is commonly dismissed by today's mainstream economists, but -- as Chang points out -- is largely responsible for the United States' rapid ascension to world power.

The central theme of Chang's book is that poor countries can get rich only by doing the exact opposite of what they are told by the World Bank, the International Monetary Fund and the World Trade Organization -- the "Bad Samaritans" referred to in the title. I found it fascinating how today's advocates of free trade only lowered tariffs after their industries had firmly established their lead over rivals. The book had numerous examples of how today's commonly accepted principles are frequently not the pre-conditions to economic success that they are seen as (e.g. low inflation, lack of corruption, etc.). The biggest lesson that I took from the book, however, was something I try to keep in mind when approaching all of our research: that it is always necessary to question conventional wisdom.

Standing on My Green Soapbox

by Mike Trapanese

It's official: Green is the most trendy color.

A movement that started on the fringes has officially hit the mainstream, with behemoths like GE and Starbucks looking to cash in on newfound commitments to the environment. In the financial world, the rise of Environmental, Social, Governance (ESG) investing amplifies the trend in parallel. Even Goldman Sachs has gone a little Green, getting its share of an investment niche approaching $3 trillion in the US alone.

Pleas to jump on the bandwagon now resonate from politicians, pundits, family members, shopkeepers; even soccer moms, pointing proudly to the "hybrid" labels on the tailgates of their Tahoes, are pro-Green. If the Green Movement has achieved nothing else thus far, it has at least raised awareness.

This has translated into two noteworthy (if temporary) accomplishments:

• A price premium for Green products and services
• An increase in investment capital for alternative energy firms

But despite the newfound predominance of the movement, change is still only moving along the fringes. Our economic system--one which requires gluttonous resource consumption to run smoothly--is still fully intact.

To simplify, there are two basic problems: the amount that we consume, and the methods of production that enable this consumption.

To simplify once again, there are two potential solutions: sacrifice (substitution, cutting back) and invention (new goods, markets, industrial organizations, methods of production and distribution, etc.).

The Green Movement puts the most emphasis on the former: take public transportation, use energy efficient appliances, avoid Styrofoam cups and plastic bags, stick to local produce, and so on. But these types of changes can only tackle the underlying problem at the margins, as sacrifices at home are more than offset by increasing production in the developing world. Furthermore, they stand to lose effectiveness when the Green trend loses luster (as most trends eventually do).

Sacrifice alone is not a viable solution to our environmental woes, neither in the near nor distant future. Invention will have to play a fundamental role.

Joseph Schumpeter popularized the notion of creative destruction: that process "that instantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one". He labels it "the essential fact of capitalism".

Any tenable solution must operate on this scale, by changing our patterns of consumption and production from within. Attacking global warming by driving hybrids is the equivalent to treating influenza with Dayquil; it makes you feel better in the meantime, but does nothing to address the root cause. The revolution that will truly deliver us from our environmental crisis will roll on the wheels of invention.

The tricky thing about invention, however, is that it happens through no clear recipe. Thus we reach an impasse. We cannot continue as we do, but we cannot yet see an alternate route. Likely, there is no way out because we have not yet created one.

To weigh once more on Schumpeter: "the problem that is usually being visualized is how capitalism administers existing structures, whereas the relevant problem is how it creates and destroys them". Only through education, incentives, and markets for ideas can we ensure that a tenable solution emerges in time. The Green Movement has brought the problem to our attention; the Green Revolution will deliver us from its grip.

Taking Stock: You, Me, & The Internet

by Michelle

I'm that girl who really liked writing papers in college and grad school. For my first kasina book report and in a spirit of simultaneous over and under achievement, I created what would otherwise be a failed research paper. With a fair amount of creative license and some attempts at humor, I tied together sources that would probably not connect harmoniously in a written piece, but seemed to come off as a success as a Powerpoint Presentation:

• Against the Machine, Being Human in the Age of the Electronic Mob by Lee Siegel
• "The Ecstasy of Communication," by Jean Baudrillard
• "Web 2.0: The second generation of the Internet has arrived. It's worse than you think," by Andrew Keen, the weekly Standard, February 2006
• "The Six Stages of E-mail," Nora Ephron, Op Ed, The New York Times, July 2007

Why is this relevant? We here at kasina are highly adept, heavy Internet users and Web 2.0 advocates. For good reason: this technology helps us and our clients do business efficiently and intelligently. My interest here was a humanistic one: What of, dare I say, our mild or major addiction to this infant medium? How are we affected by it personally and socially? How do we carve out a space for a life apart from it and apart from economics? How has the advent of the Internet affected how we think about self-expression versus art? What is the difference between information and knowledge? Does e-mail actually create "connectivity" or in fact, just the opposite? How has our privacy been affected? While we will not necessarily change our current behaviors or quell the significance or momentum of THE INTERNET, the presentation, via Siegel's book and related articles, was a small effort to consider how we are all so fundamentally changed by its existence.

It being Easter time, I feel I must also mention our new system of using "ducats" during Friday's book reports. What's a ducat, you ask? At kasina it is a small plastic egg, the kind you ordinarily might receive with a chocolate surprise inside. Here we receive them empty. Their function? They break in half, leaving each one of us with two pieces, representing our two opportunities to voice our opinion on the topic at hand. Anu originally told me the word was spelled "ducket" and is Olde English. I looked on the Internet and couldn't find it, so I didn't believe him. Carol set me straight. Dictionary.com offers that it is slang for cash money. So much for carving out a space apart from economics. And, of course, the utter convenience of the Internet is not lost on me. Regardless, a "ducat" at kasina is a turn to speak. You do this by tossing your piece into the center of the room.

I mention this because I was both pleased and alarmed to find that certain questions raised in this book report sparked such fierce debate that, at times, it was like watching a festive deluge of pastel colored shapes. Will even stole a ducat for a third turn. The questionable behavior of our marketing director aside, I do believe this is an important topic, and I am happy to work in a place that creates a forum for such discussion.

Confessions of a working actress...

by Elizabeth

Can I tell you a secret?

The truth is, though I am an artistic assistant in kasina's Business Development department, I am actually an actress.

I know, shocking!

Ok, it's actually not a secret at all. I answered kasina's job post for an "actor, painter, writer, or poet who needed a support job" in July 2007 with both curiosity and eagerness, and I have been happy here ever since.

The reason I am able to work successfully in both worlds is that kasina encourages me not to separate my life into categories or "work/life balance," but instead to think about how I can be the best in both categories.

Other actors might criticize the fact that I do something not acting related to support myself while working to become more established. A lot of actors go on unemployment during the lean times to stay focused on getting more work. Others work at bars from 4pm to 4am to make money. And I think that is great for them. Honestly!

But, I am excited to work with a wonderful group of people who acknowledge that I have a lot of skills and allow me to exercise those other talents while staying true to who I really am.

As my turn to host one of our weekly book reports approached, I knew I wanted to present a play. After research and a very helpful Drama Bookshop employee, I found Hold Please by Annie Weisman -- the comedic tale of four female office assistants -- Jessica, Grace, Agatha, and Erika -- and their roles within the company and relationships with one another. Grace and Agatha are career administrative assistants, working with the company for over twenty-five years. Jessica and Erika are in their early twenties and see the future as a blank canvas that they will fill, just as soon as they know what they really want to do with their lives.

In researching for my book report, Mike Ma also gave me the interesting Harvard Business Review article "Task, Not Time: Profile of a Gen Y Job" by Tamara J. Erickson to read. The article talks about how Gen Y employees, (me!), prefer jobs defined by task and not time, therefore wanting to be compensated for what is produced.

After reading the play and article, I walked away thinking about the important issue of time and what one decides to do with his or her time. Some, like the character Jessica, see a job as just something she does during the day and is not emotionally attached to whatsoever. It's her life outside of her job that she cares about. Others, like Agatha, are so entrenched in her job that it defines her and is incorporated into all aspects of her life.

Who knows...maybe someday I will get the other artistic assistants together and direct them in a production of Hold Please in the ideation room...at kasina, the possibilities are endless!

The Lion and the Mouse...

by Will (part 3 of 3)

In the last few months, I've been at two different events at the United Nations, one was for members of the Public Relations Society of America and the most recent was the Investor Summit on Climate Risk. Each time, I walked away with the question of how a small company like kasina can make a difference globally. The interesting, and unexpected, thing is that it was the UN that posed the question to me.

The UN Fund for International Partnerships and CERES have made it clear that my thinking that a company like kasina can't make a global impact was wrong. After listening to their presentations, I realized my thinking hadn't been consistent -- after all, there isn't an asset management company out there I don't think kasina can help, and many companies in this industry are bigger than the UN. But still, it seemed to me that the UN was just too big, too much of a monolith to make a real contribution to.

It's rare that being wrong makes me so excited. The applicability of our expertise never seemed more apparent, even if it isn't applied in the usual way. The UN helps small business in impoverished areas get a head start. Can't businesses like those benefit from business plan experts? How about getting out the message of the good work a lot of UN agencies are doing, can't that messaging benefit from people used to improving marketing?

And what about the asset management industry and environmentalism? kasina cares deeply about environmental issues, as does the UN, and the Investor Summit made me realize that we're in a good spot to talk about green product development and guide clients through all its pitfalls. It also made me realize that what's being done now isn't as comprehensive or profitable as it could be. I know I'd like to help, and I'd like to see kasina help, and with a partner like the UN, I feel like the sky's the limit. Hopefully you'll be hearing about this more down the road.

A Quick Disclaimer...

By Anu

As many of you have by now noticed, we just launched our new kasina Web site. After receiving a few messages, I'm compelled to say that this is a photo of me. And I am not holding anything, um, illegal: they're hops. I'm a fan of big, American ales that use large quantities of hops.

A Culture of Trust

by Johanna

At our most recent winter strategy offsite, we spent a lot of time talking about our culture and how we relate to each other. One theme was pervasive: trust is fundamental to the smooth functioning of our company. Trust remains critical amongst coworkers, but is becoming tougher to achieve for a few reasons, including the following:

• Everyone's Working From Home: Instituting "Flextime," or giving the option of working outside of the office, gives people the freedom to pick the place and time that will be happiest and most productive, but also requires collective trust that we're all working our hardest.
• We Prefer Anything But In Person: Even when everyone is in the office, e-mail instead of face-to-face communication is often the way coworkers relate to each other. While it may be efficient, e-mail doesn't communicate tone and body language. Electronic message recipients end up doing a fair amount of interpretation of short, quickly-written e-mails.

One way that we foster trust is through our company offsites. We spend three days, two times per year, reaffirming our mission and learning more about each other as individuals. Discussing the future of our firm, having open dialogues about our culture and how to improve it, and even cooking meals together helps instill that critical trust that we are all working toward our collective success.

Cutting edge companies are using the idea of leading with trust, as opposed to fostering an environment in which employees need to earn it or prove they are worthy of it. For example, Apple uses the concept "Assume Positive Intent" as one of its core values. The idea of leading with trust is also fairly well argued in the short essay "Trust CAN Possibly Be Good."

How can we as leaders and as individuals promote a workplace that leads with trust?

Love Your Day Job

by Mike Ma

"Enjoy that perfectly made beverage!"

"Sir, that is the world's finest espresso you can get. Please enjoy it."

"Ma'am, that cappuccino was made perfectly by the finest barista on the east side."

"Sir, that latte was made perfectly by the finest barista on the east side... or the west side, for that matter."

I was having coffee at a Starbucks at 47th and 3rd and I heard a loud Brooklyn accent bellowing out the above statements. Instead of just saying "Vanilla latte!" when a drink was completed, this gentleman endorsed his own product with such authenticity and enthusiasm it was hard to not get excited about what you were drinking, or at the very least be pleased and amused.

As the typical turn-of-the-year take-your-bonus-and-run season is upon us, I encourage everyone to think of this guy who probably makes an hourly wage. He took a potentially mundane, low-paying job and exerted a lot of pride to his work. Before you consider jumping ship, I encourage you to consider, for a few minutes, if you feel half as enthusiastic about your job as this barista does about his. To that end, I am spending this part of the year asking myself:

• How can I make my job more interesting?
• What are the things that I control that can make me excited about my work?
• How am I mastering my own fate and controlling my own happiness?

Forget budgets, comp, headcount... While most of the people in our industry have an income I will guess is at least a solid order of magnitude more than that of the Brooklyn Barista, I entreat you to ask yourself: are you half as happy as the Brooklyn Barista? What can you control to affect your own happiness?

Another Starbucks Question

by Corianna

In December, Lindsay wrote a blog piece inspired by Mark Penn's new book, Microtrends: The Small Forces Behind Tomorrow's Big Changes. Lindsay recounted Penn's comparison of "Starbucks economy" of today, to the "Ford economy" of the twentieth century. Penn argues that consumer attitudes have moved from the ideal of mass production to that off mass customization. Starbucks, with its crowded menu of caffeine, milk, and flavor combinations, is undoubtedly the poster-child of 21st century customization. Who, Lindsay asked, would be the Starbucks of the asset management world?

In some ways, the asset management industry, with its cornucopia of funds, already looks a lot like Starbucks' menu. Indeed, you might think that everyone should be able to find what he or she is looking for from the industry's innumerable offerings.

It's not that simple, though; offering many things is not synonymous with offering customization. Customization is about more than just options; it's about experience. I suspect that customers--advisors and investors alike--aren't exactly awash in waves of joy when they see long mutual fund product lists. They are, I imagine, rather overwhelmed. I think it's time to step away from the Starbucks analogy. It's time to ask what customization asset-management-style looks like. And there's an answer: customization, asset management style, looks like UMAs. So, I'd like to tag a line onto Lindsay's question: Who, I want to know, will be the first to make UMAs available to the average asset management customer?

Tying it All Together

by Lee

As we put the holidays behind us and move into a new year, most of us also leave behind performance review season. Many of my friends were complaining at various holiday parties about having to "waste" so many hours on performance reviews, discussions about bonuses, and other year-end rituals. While certainly time-consuming, I see these efforts as anything but a waste, if done properly (a big if).

While many (surprisingly, not all) firms conduct performance reviews with their employees, most fail to tie their performance measurement, compensation, and employee development systems together.

Several of our clients, for example, conduct annual performance reviews for their wholesalers that highlight strengths and weaknesses. The training wholesaler efforts at these firms, however, are one-size-fits-all: no special training efforts are made to address weaknesses.

Compensation systems are no better: all too often, we hear from our clients that their employees get paid what the client "thinks they should make" rather than what they have earned. One friend achieved all of her performance objectives for 2007, yet received virtually no year-end bonus, while another missed most of his objectives but was thrilled with his bonus.

An effective, holistic approach to performance measurement should:

• Align individual employee goals with organization objectives (when employees succeed, the company should, as well)
• Measure employee performance objectively, fairly, and accurately (metrics should not be subjective)
• Focus training and development where it is needed most (individualized training plans should be created to help employees' careers grow)
• Tie employee performance to recognition and reward (performance reviews should have a significant impact on compensation)

When done properly, performance reviews become a valuable roadmap for employee success, and not simply another task to complete.

Book Report: Overwhelming Overtreatment

by Andy

Shannon Brownlee's new widely acclaimed book, Overtreated, is an insightful look into the negative effects of America's obsession with the marvels of modern medicine and the underlying institutional problems that allow for its misappropriation. The obsession is so engrained, she argues, that a good deal of treatment is unnecessary and ultimately dangerous. Furthermore, she describes via detailed cases where these expensive treatments upon thorough scientific inquiry as not proven effective. Overtreated clearly illustrates how economic incentives govern the workings of a fragmented system that is in need of repair.

The book uses the shock-and-awe strategy of extreme anecdotes that are typical of this genre to illustrate why this 'overtreatment' is occurring. In the process, Brownlee does an excellent job of illustrating supply-induced demand of medical care. She also broaches the delicate underlying cultural challenges that need to be overcome in order to reform the system. She is critical of the on-demand care that the current system provides and for which the medical community is ultimately compensated. She also recognizes how profits drive various components of the system not just out of avarice, but out of necessity of survival - such as non-profit hospitals using the profits from lucrative procedures to subsidize care to the uninsured and money-losing operations such as urban ERs.

The book points to evidence-based care, which she sees as the lynchpin of success of the Veterans Health Administration (VHA), and which she holds as a case study that she opines for the medical community as a whole to embrace. While Brownlee definitely offers insights into some incremental change that could improve healthcare, her argument ultimately commands that the medical system and the way Americans view medicine be entirely revamped. It is both a validation of the power of the country's economic engine in relation to healthcare and a critique of its negative effects.

One Bad Apple Spoils the Barrel

by Johanna

Determining if a job candidate is a cultural fit is one of the most important criteria to look for during the recruitment process. Often, organizations learn the hard way: by hiring job candidates with superior experience and skill sets, but ignoring the nagging suspicion that the person may not gel with the culture. It's tempting to ignore your gut in favor of getting someone in the door, but hastiness can mean that an entire team effort and group synergy is brought down by one individual. On the flipside, hiring a team member who is a cultural fit reinforces those dynamics that are critical to the group's success.

How do you define culture? I always thought it was similar to determining if a joke is funny - you know it when you hear it. However, defining and evaluating the culture fit of candidates is one of the most important parts of recruiting. One blogger uses a poker game as a pretty fitting example.

Here at kasina, our culture is built around characteristics like the following:

• A love of learning
• Creativity
• Focus on team
• Passion for new ideas

Culture is influenced by each member of an organization. Each addition to the kasina family has a noticeable impact -- this makes the stakes high for choosing whom to hire, and means it's worth waiting to find that perfect fit.

Even though financial services firms and distribution organizations can be 10 (or 100) times the size of kasina, each marketing and sales team should take the time to define the current status and vision for the group culture. For example, one e-Business group puts job candidates through an extremely rigorous hiring process that involves interviews with both junior and very senior members of the firm. In any of these meetings, if a candidate repeatedly uses the word "I" instead of "we," it raises flags that that person will not fit within the close-knit team environment.

Cancer and Hope for the Holidays

by Mike Ma

As the holiday season is upon us, I've spent a lot of time thinking about why I like the business that I am in -- it really comes down to the people I'm lucky enough to meet in my tenure at kasina.

It's with a heavy heart I point out two dear friends of the firm who have recently been diagnosed with cancer. While their situations are indeed unfortunate, and I get teary-eyed just thinking about them, their strength, humor, and resolve truly give me something to think about and learn from. I'd like to honor them with some real estate on our little part of the internet:

• Jenn (Grady) Dorsey has been a client and a friend that I got to know during her tenure at Columbia Management. She has a laugh that can brighten a room, and chances are, she's the one who told the joke. I've been admiring how she can make me cry and laugh at the same time. Please visit her and show her some love at CaringBridge.
• Dave McCalley at American Century is one of the most focused, talented people I've ever come across. Whether it is in his job in connecting with shareholders, or playing the trumpet, or advising national teams on long-distance running, he brings an intellect and passion that is amazing to everything he does. I find inspiration from him at his blog.

I think cancer has picked two people who shouldn't be trifled with, and I feel lucky and honored to continue to learn from them as they pull through these difficult times.

In the meanwhile, I'd ask that people honor them through their own efforts ... leave a note or a comment on their sites, or make a contribution. We are proud sponsors of Mutual Funds Against Cancer, and hope that you can become more involved, too.

The Attack on Ivy-ish Education

By Mike Ma

At Steven's behest, I am cross-posting this from my personal blog where this post went up yesterday.

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One of the things that I have been most challenged with in the last few months is hiring and managing people. As anyone can attest to -- it's damn hard.

A standard recruiting playbook would say, "Scour Harvard, Yale, Stanford and a number of other elite institutions for the next 'rock star.'" The problem is that most of them (and I want to stress that this is not all) ... ahem ... well, how do I say this ... are jerks. (I say this as a recovering "jerk.")

The more politically correct recruiting parlance is to say that they are "not a culture fit." But there is a selfish immediacy to the way that I see a lot of recruits approach their work. As if they are too good for the work that they may get. And while I think entrepreneurial vigor is to be admired, there is something that has been offputting and I think there is something to the way that elite institutions educate.

Basically, we are taught analytical skills but business is really a synthetic exercise. To put it another way, an Harvard grad can give you a Hoopes Prize thesis on why Humpty Dumpty shouldn't have fallen off the wall (or been on the wall in the first place!), but business requires us to think about the quarterly project plan on how to get him back (or outsourced overseas for 1/10 the cost!).

This is the attack on Ivy-ish education.

Causes? Well, I think it is how we are taught. That is, we are taught to try to deconstruct these great theorists we read about as part of our formal education. Say, pick apart Descartes' proof for the existence of God. Most of what we are taught is how to pick things apart. Pick. Pick Pick.

Fast forward to work, what happens when you take your first entry level job? Your boss is a ten year veteran with a BS from Ohio State. Surely, I must be smarter than that him, no? And so begins the professional picking ... pick pick pick. But this time, no A's are given. You are most likely laid off or opportunistically downsized. (I was ... though the CEO of a former employer actually wanted to fire me for being a smartass, but I made it to the next round of layoffs).

One of the things that I am proud of at kasina is our Book Club and weekly book reports. Each week we present a book and figure out what we can learn. They have been invaluable to me in my development as a businessperson and a person in general.

However, one of the common criticisms is, "This book is crap." "They are not that smart." Or just ..(cover your ears) ... "Bullshit." It takes an inordinate amount of retraining and reprogramming our people to see the value in these works in a way that doesn't reduce to picking at them like an academic work. But should we be surprised given how we educate at the elite institutions?

We need more synthetic tolerance in our higher education. Personally, I've found the more effective approach has been to really force yourself to think about how do you apply this concept to what you are doing today. What is the unique thing that someone else can teach me? The Ivy arrogance has got to go.

Some of the work that Malcom Gladwell's work around persistence and cooperation is instructive (10,000 hours to mastery, regardless of field). Also, Dan Pink's work about A Whole New Mind is as well.

Being More Naked on Our Blog

by Conrad

In our last book report, Carol talked about "Naked Conversations: How Blogs are Changing the Way Businesses Talk with Customers," a book about corporate bloging. One of the main points in the book is that blogs have to be personal and passionate, and this sparked an interesting debate on how we could make our own blog better.

To make a long story short, we decided to ditch our usual blog-writing process to encourage people say whatever they want. So you will hopefully see more creative ideas on here. If somebody passionately thinks that firms should base their investment decisions on fortune tellers, for example, he can now make a case for it here. We might disagree, but it will hopefully spark some good conversation.

Training Gaps Abound

by Lee

It has always amazed me how little emphasis is spent on training in the asset management world. While many senior executives speak about the importance of training, the area is typically under-funded with little strategic direction. In fact, the training budget is typically the first area cut when firms look to lower costs.

I've had a chance to spend a fair amount of time thinking about training as part of several recent client engagements, and have seen three common gaps:

• Focus on Training, not Development: Training at asset management firms is most frequently directed at new hires or focused on new products. Many firms will also conduct sales training as part of their national sales meetings. Training, however, is typically designed to bring people up to speed, or to refresh knowledge or skills (e.g. "Here's how to use the CRM system," or "Here is insight into how the PM manages this fund"). Rarely do firms think about true employee development. Focusing on development requires firms to answer "what are the skills or knowledge that could allow employees do their jobs more effectively, be happier, and get to where they want to be in their careers?"


• Lack of Personalization: Group training definitely serves a purpose, but not everyone has the same gap in skill or knowledge. For example, one experienced external wholesaler may need extensive product-related training, but minimal territory management support, while another may be a product expert, but need extensive one-on-one coaching around how to run an effective meeting. Each individual should have a personalized development plan that is tailored to his or her needs.


• Lack of Integration with Performance Reviews: Even organizations that have sophisticated training and development programs in place typically fail to tie these efforts to employee performance reviews. Without setting clear goals for individuals regarding training and development that have a direct link to performance appraisals, training remains an afterthought.

Work can be fun AND profitable

by Steven

When I applied to colleges, I had to write essays on people who inspired me. I wrote about historical figures, such as Gandhi and Martin Luther King, because I genuinely admired their principles. However, I didn't really feel such a personal connection with these great men because they are almost like gods in our society -- not real human beings.

Yvon Chouinard's book "Let my people go surfing" finally changed that. He is an entrepreneur who has high aspirations and sees business as a means to change the world.

Chouinard began his life as a young climber whose primary goal in life was to surf in the winter and spend his summers in Yosemite. His goal was to work as little as he could at a "real job" so he could focus on his true passion: climbing. Out of this work/life philosophy, he ended up starting a clothing company for outdoor sports that grew into a multi-million dollar organization. His company, Patagonia, believes that work needs to be fun in order to be a successful endeavor, and that it should be conducted in a way that is beneficial to employees and the environment.

He believes that in order for an individual to claim a love for wild and beautiful places, then one must participate in the fight to save them, as well as help reverse the steep decline in the overall environmental health of the planet. Patagonia donates time, services and at least 1% of its sales to hundreds of grassroots environmental groups all over the world.

Patagonians have been pioneers in designing products with the least possible environmental impact. The company uses recycled polyester in many of its clothes, and only organic, rather than pesticide-intensive, cotton.

He treats his employees with respect, and recognizes that they have lives that need flexibility. Patagonia has 300 employees at its headquarters, in Ventura, and one hundred children in its on-site development center. Chouinard believes that work/family balance is essentia, so his company provides at least sixty days of paid maternity/paternity leave. Patagonia is consistently one of the "top 100 firms to work for" and Chouinard questions why anyone would run a company that is "hard" to work for.

Chouinard demonstrates to corporate America that profit is not the goal. As he puts it, "the Zen master would say that profit happens when you do the right thing."

I have been out of college for many years now, but it took me this long to find a person whom I aspire to be like. Yvon Chouinard understands what is "right," and has made it his mission to run his company that way -- that's what I aim to do at kasina.

Speaking On A Panel: Be Kind To Your Audience

by Mike Ma

One of the most trafficked posts on my personal blog is something I wrote a year and half ago on how to moderate a panel. Since I am helping organize a few panels and conferences this season, I'd like to update this with some tactical recommendations on how to present on a panel when you are asked to show how you do something at your firm.

Typical industry panel presentations of this ilk go something like this:

1. Introduction of the firm one represents (located in New York, 1000 employees, $54B under management)
2. Description of a process at their firm (how we do CRM, how we structure our sales team, etc,)
3. [Results] - I bracket this, since it is rarely presented.

Sigh. Reaching for your blackberry yet? Perhaps strategizing on your cocktail hour attack? Trolling through the attendee list? I'd bet most likely so. Conference goers are a cynical lot, aren't they? (we?)

Most panelists wait for the last possible moment to share the thing that people most want to hear. I say change that. Front load it and give them a little instant gratification. Here is a generic plan.

1. R.POV/8. What is your Remarkable Point of View in 8 words or less? Throw that up there as your first slide. Why are you or your firm there? What do you believe? You have to let us know why you are up there and the rest of the hundreds or thousands of us are down here listening!

2. What are the results? That goes next. Quick! Before you lose them. How did you get there? How much money did you save or make? What happened to the % increase in customer satisfaction? Time reduced in lead time? How much closer did you get to a six sigma error rate? Give me numbers, please! Show me the scoreboard!

3. What were the three factors to success? Most panelists cherish completeness to tell the whole process they or their firm goes through. Give me the "Keys to the Game." Oh, and I mean 3.

4. Give me screenshots, a demo, or the internal documents. Let me see the real McCoy. If your CRM system is so great, give me a test drive. I want to see how you did it and what it looks like. Don't worry about competition, it is all about execution anyway. That I can see what another firm does and their strategy doesn't make it any easier for me to viably, and commercially duplicate as my own.

I am admittedly attention deficient these days, but I think that these principles can provide benefits for all of us in attendance. I will try to do the same myself. See you out there on the conference circuit.

Distribution Lessons from Dell

by Anu

Earlier this summer, Dell announced a partnership with Wal-Mart. For fifteen years, Dell promoted a business model for "direct" sales to customers. Dell maintained that this link to customers provided necessary information on computing trends, consumer needs, and customer service issues. Through Wal-Mart, Dell loses that link to their consumers. Dell created a new, Wal-Mart-only model that sells at a bargain-basement price. To balance that effort, they'll need to reinforce the value proposition to customers currently purchasing higher-priced models at Dell.com. Why would I buy at dell.com instead of going down the street?

What if you could bring in a new distribution partner the size of Wal-Mart? (Wal-Mart accounts for almost 8% of all money spent in US stores.) Would you do it immediately? How would it impact operations and portfolio management?

Distribution problems are not as simple as "the more distribution the better." Asset managers should look to balance three objectives:

• Adding distribution partners


• Profitably scaling operations and portfolio management


• Communicating the impacts to current distribution partners

While Dell's dilemma is different from a typical asset manager (Dell is managing direct versus intermediary), firms should use the case study to examine distribution growth strategies.

A master in the art of living draws no sharp distinction between his work and his play

By Steven

Over the years, I have realized that hiring is the hardest and most important task for kasina. We are an innovations firm, and our people are our product. It has been hard for us to decipher the key attributes of a successful kasina employee. But over time, I've realized that this quote by the French writer and poet Francois-Rene de Chateaubriand captures it best:

"A master in the art of living draws no sharp distinction between his work and his play; his labor and his leisure; his education and his recreation. He hardly knows which is which. He simply pursues his vision of excellence through whatever he is doing, and leaves others to determine whether he is working or playing. To himself, he always appears to be doing both."

We believe that work has to be fun, but that fun can't compromise excellence.

When More Information is Less Valuable

by Mike Mc

Two days. Two organizations. Two press releases. A $10,300,000,000 difference.

Both the Investment Company Institute (ICI) and FRC recently released information on estimated net inflows into stock and bond funds in the month of June. The numbers - $13B and $23.3B, respectively - are, um, not exactly in the same ballpark.

Having recently read Fooled by Randomness by Nassim Nicholas Taleb, I've been thinking a lot about the difference between information and "noise". If you've read the book, you know his argument that we are inundated with a great deal of useless information - "noise" - and that too often this information is readily accepted and used by individuals and organizations to make decisions.

I am oversimplifying things, but the idea has led me to take a hard look at the information I consume. I find myself starting to pare down the information I review as I question its validity and value. As I go through this process, the disparity between the figures provided by the ICI and FRC strikes a real chord. How much do we really know?

I don't plan on drawing a blanket, industry-wide conclusion here. Just a personal one. I see the need to further embrace my ignorance, recognize how little I know, and actively question that which I don't clearly understand.

Only took $10B to help drive that home.

Thin client to the rescue...

by Anu

In our client visits, we notice that desktop computers are prevalent throughout the country for asset managers.

Why not move to thin clients in the next generation? Thin clients are computers with no moving parts. The desktop client only takes user input (e.g. keystrokes, mouse actions) and processes them into commands for a server.

There are three major advantages to a thin client:

• No moving parts means trivial energy consumption.


• Easy to backup files, since they're all on a server.


• Easy to install new software, since (drum roll), all software is on a server.

Focusing only on the first advantage, firms could realize thousands of dollars saved in energy use, thousands saved in new infrastructure, and an authentic environmental message "look what we're doing to reduce our footprint."

HP is making it very easy and compelling to do so. Read more here.

Where have all the recycling bins gone?

By Steven Miyao

...they're certainly not in the conference rooms.

At least once a week, when I am at a client's office, I am baffled by the waste that is created by a single meeting. Only a few of the offices I visit recycle the paper that is left in their conference rooms.

People claim that they are more concerned about their carbon emissions, but 40% of the total U.S. emission and more than 70% of total electricity usage is contributed by heating, cooling and powering of office space . One office worker can use a quarter ton of materials in a year, which includes 10,000 pieces of copier paper.

The rationale for saving energy and recycling is not only cost savings and environmental concern, but also the competition for talent. Several recent surveys show that employees, especially those from my generation, who grew up separating paper from plastic, don't want to work for environmentally oblivious companies. Adecco USA, a staffing firm, says that one-third of employees would be more inclined to work for a green company, and more than half wish their employers would be more environmentally friendly.

As companies, we have the opportunity to make a big impact on the environment through green policies that change the behavior and attitudes of our workers.

You can start with three simple steps:

1. Recycle: Ensure that your conference rooms have at least 2 more containers.

• Paper - Presentations, handouts, newspapers, magazines, photocopies, envelopes


• Plastic - Plastics #1-#2 -- recyclable in most areas. Usually found on water bottles and food containers

2. Computer Power Management:

• Use laptops they use as much as 90% less energy than desktops


• Set up sleep mode on computers


• Turn off computers overnight or have them automatically hibernate

3. Carbon offsets:

• Purchase carbon offsets for employee business travel and commutes (business travel accounts for as much as 40% of a company's carbon output).


• Carbonfund, DrivingGreen, MyClimate, NativeEnergy, and TerraPass - those are just a few of the many organizations offering carbon-offset services.

I am going to be in a conference room meeting at a client Monday morning. If they aren't going to recycle I might be forced to collect everyones bottles and drop them off at our recycling bin.

Wainwright: Banking on Values

by Lee

I met a friend of a friend the other day who told me about Wainwright Bank, which is based in Boston. The bank is a national leader in socially progressive banking. Since 1992, Wainwright has provided $570 million in loans to services for progressive causes, including women's rights, homelessness, affordable housing, environmental protection, and gay and lesbian issues.

Based on some quick reading I've done, I found that co-founder Bob Glassman was the visionary behind the bank's social agenda: he wanted to create a new model for the banking industry by demonstrating that "you can be profitable...at the same time you are allocating capital to underserved communities." They offer largely the same products and services as all banks (online banking and bill pay, credit cards, debit cards, mortgages, etc.) with some differences: their people are excited and enthusiastic about what they're doing, their branch offices are unique (their first cyber cafe branch opened in 2001 with Internet kiosks anyone can use, soft seating, a fireplace, free coffee and donuts, a TV, newspapers, etc.), they provide a wide range of nonprofit services, and they are extremely active in the community.

I need to read more about Wainwright, but I'm excited to learn more about other organizations that, like kasina, are experimenting with a unique mix of profitable business, fun work environment, and social responsibility.

Building Brand

by Conrad

A senior sales executive recently said: "I know that advisors really like our value added program, but I don't know if we get any more business because of it." This comment speaks to a problem currently taking shape in the industry, namely that while firms know they need to build brand with advisors, they often don't know how to do this most effectively.

Advisors buy products based on performance, portfolio construction, management, and brand, among other things. While sales and marketing can't influence the first three factors, they can influence the brand.

However, there are many ways to create brand. These include the creation of a value added program, investment in wholesaler training so that wholesalers can then build relationships more effectively, and the investment of more funds into a Web site to just name a few. It ultimately comes down to opportunity costs. Firms usually do not live in the land of plenty and have to set priorities. They have to make choices such as whether to invest in the value added program or in the Web site. However, firms often lack the information to make an informed decision and sometimes simply do not know what creates brand most effectively. The bottom line is that they often don't know what advisors care about most.

Therefore firms have to conduct research on what their target advisors care about the most, finding out what aspects lead to more business and what aspects do not. After that the firm can analyze how the firm does in these areas and define the strengths and weaknesses. Then the firm can create a targeted strategy and allocate the resources to the areas where they get most bang for their buck.

Environment is In

by Steven Miyao

The environment is becoming big business, and investment firms are hurrying to cash in on the opportunity. Allianz just launched the RCM Global Eco Trends Fund, which invests in companies that support alternative energy, energy efficiency, pollution control, environmental quality, waste management, recycling, and the clean water sector. Fred Alger's is another firm that recently launched an emviromental fund, the Spectra Green fund.

I anticipate that investors will flock to this fund -- the underlying companies will also be successful due to the current environmental state.

The Institutionalization of Distribution: Maneuvering Through the Proverbial Supermarket

by Steven Miyao

Supermarkets and large broker-dealers have more in common than you may think. Supermarkets sell products to shoppers; broker-dealers provide products to advisors. Supermarkets strategically guide shoppers into making certain purchases using physical shelf space and advertisements; broker-dealers encourage advisors to buy certain products using virtual shelf space and preferred product lists. Supermarkets rely on distribution agreements with retailers to guarantee optimal shelf space; broker-dealers do the same with advisors.

However, with competition for assets increasing and favorable shelf space becoming more limited, the ways in which products are being distributed to broker-dealers is beginning to shift from a relationship driven process to one that is increasingly more institutionalized. In order to remain competitive, asset management firms must learn the roles and responsibilities of the intermediary players.

Playing the New Game
The process of selecting which products will garner prime shelf space at broker-dealers has evolved from a relationship-driven judgment to an increasingly complex, quantitative decision, similar to how decisions are made within the institutional channel. Therefore, asset managers must...

Happy New Year

by Steven Miyao

The beginning of a new year is always a time for reflection. I always ask myself, "What did I do well last year? What didn't I do well? What do I want to improve in the New Year?" While I don't personally do New Year's resolutions, I was inspired by Bruce Mau's list of 43 ideas for moving beyond thinking differently to doing differently. A designer and architect, Mau published this list as An Incomplete Manifesto for Change.

Many of his thoughts are things that we at kasina have tried to integrate into our practice. I hope you enjoy it.

An Incomplete Manifesto for Growth

1. Allow events to change you. You have to be willing to grow. Growth is different from something that happens to you. You produce it. You live it. The prerequisites for growth: the openness to experience events and the willingness to be changed by them.

2. Forget about good. Good is a known quantity. Good is what we all agree on. Growth is not necessarily good. Growth is an exploration of unlit recesses that may or may not yield to our research. As long as you stick to good you'll never have real growth.

3. Process is more important than outcome. When the outcome drives the process we will only ever go to where we've already been. If process drives outcome we may not know where we're going, but we will know we want to be there.

4. Love your experiments (as you would an ugly child). Joy is the engine of growth. Exploit the liberty in casting your work as beautiful experiments, iterations, attempts, trials, and errors. Take the long view and allow yourself the fun of failure every day.

5. Go deep. The deeper you go the more likely you will discover something of value.

6. Capture accidents. The wrong answer is the right answer in search of a different question. Collect wrong answers as part of the process. Ask different questions.

7. Study. A studio is a place of study. Use the necessity of production as an excuse to study. Everyone will benefit.

8. Drift. Allow yourself to wander aimlessly. Explore adjacencies. Lack judgment. Postpone criticism.

9. Begin anywhere. John Cage tells us that not knowing where to begin is a common form of paralysis. His advice: begin anywhere.

10. Everyone is a leader. Growth happens. Whenever it does, allow it to emerge. Learn to follow when it makes sense. Let anyone lead.

11. Harvest ideas. Edit applications. Ideas need a dynamic, fluid, generous environment to sustain life. Applications, on the other hand, benefit from critical rigor. Produce a high ratio of ideas to applications.

12. Keep moving. The market and its operations have a tendency to reinforce success. Resist it. Allow failure and migration to be part of your practice.

13. Slow down. Desynchronize from standard time frames and surprising opportunities may present themselves.

14. Don't be cool. Cool is conservative fear dressed in black. Free yourself from limits of this sort.

15. Ask stupid questions. Growth is fueled by desire and innocence. Assess the answer, not the question. Imagine learning throughout your life at the rate of an infant.

16. Collaborate. The space between people working together is filled with conflict, friction, strife, exhilaration, delight, and vast creative potential.

17. ____________________. Intentionally left blank. Allow space for the ideas you haven't had yet, and for the ideas of others.

18. Stay up late. Strange things happen when you've gone too far, been up too long, worked too hard, and you're separated from the rest of the world.

19. Work the metaphor. Every object has the capacity to stand for something other than what is apparent. Work on what it stands for.

20. Be careful to take risks. Time is genetic. Today is the child of yesterday and the parent of tomorrow. The work you produce today will create your future.

21. Repeat yourself. If you like it, do it again. If you don't like it, do it again.

22. Make your own tools. Hybridize your tools in order to build unique things. Even simple tools that are your own can yield entirely new avenues of exploration. Remember, tools amplify our capacities, so even a small tool can make a big difference.

23. Stand on someone's shoulders. You can travel farther carried on the accomplishments of those who came before you. And the view is so much better.

24. Avoid software. The problem with software is that everyone has it.

25. Don't clean your desk. You might find something in the morning that you can't see tonight.

26. Don't enter awards competitions. Just don't. It's not good for you.

27. Read only left-hand pages. Marshall McLuhan did this. By decreasing the amount of information, we leave room for what he called our "noodle."

28. Make new words. Expand the lexicon. The new conditions demand a new way of thinking. The thinking demands new forms of expression. The expression generates new conditions.

29. Think with your mind. Forget technology. Creativity is not device-dependent.

30. Organization = Liberty. Real innovation in design, or any other field, happens in context. That context is usually some form of cooperatively managed enterprise. Frank Gehry, for instance, is only able to realize Bilbao because his studio can deliver it on budget. The myth of a split between "creatives" and "suits" is what Leonard Cohen calls a 'charming artifact of the past.'

31. Don't borrow money. Once again, Frank Gehry's advice. By maintaining financial control, we maintain creative control. It's not exactly rocket science, but it's surprising how hard it is to maintain this discipline, and how many have failed.

32. Listen carefully. Every collaborator who enters our orbit brings with him or her a world more strange and complex than any we could ever hope to imagine. By listening to the details and the subtlety of their needs, desires, or ambitions, we fold their world onto our own. Neither party will ever be the same.

33. Take field trips. The bandwidth of the world is greater than that of your TV set, or the Internet, or even a totally immersive, interactive, dynamically rendered, object-oriented, real-time, computer graphic-simulated environment.

34. Make mistakes faster. This isn't my idea -- I borrowed it. I think it belongs to Andy Grove.

35. Imitate. Don't be shy about it. Try to get as close as you can. You'll never get all the way, and the separation might be truly remarkable. We have only to look to Richard Hamilton and his version of Marcel Duchamp's large glass to see how rich, discredited, and underused imitation is as a technique.

36. Scat. When you forget the words, do what Ella did: make up something else ... but not words.

37. Break it, stretch it, bend it, crush it, crack it, fold it.

38. Explore the other edge. Great liberty exists when we avoid trying to run with the technological pack. We can't find the leading edge because it's trampled underfoot. Try using old-tech equipment made obsolete by an economic cycle but still rich with potential.

39. Coffee breaks, cab rides, green rooms. Real growth often happens outside of where we intend it to, in the interstitial spaces -- what Dr. Seuss calls "the waiting place." Hans Ulrich Obrist once organized a science and art conference with all of the infrastructure of a conference -- the parties, chats, lunches, airport arrivals-- but with no actual conference. Apparently it was hugely successful and spawned many ongoing collaborations.

40. Avoid fields. Jump fences. Disciplinary boundaries and regulatory regimes are attempts to control the wilding of creative life. They are often understandable efforts to order what are manifold, complex, evolutionary processes. Our job is to jump the fences and cross the fields.

41. Laugh. People visiting the studio often comment on how much we laugh. Since I've become aware of this, I use it as a barometer of how comfortably we are expressing ourselves.

42. Remember. Growth is only possible as a product of history. Without memory, innovation is merely novelty. History gives growth a direction. But a memory is never perfect. Every memory is a degraded or composite image of a previous moment or event. That's what makes us aware of its quality as a past and not a present. It means that every memory is new, a partial construct different from its source, and, as such, a potential for growth itself.

43. Power to the people. Play can only happen when people feel they have control over their lives. We can't be free agents if we're not free.

A Focus on Coaching: Snow Easy Job

by Mike Ma

As with all New Year's resolutions, we too have them at kasina. One of them is to rejuvenate our commitment to coaching our employees: the very same goal that many of our clients share with us as well.

I've learned a lot about this from my second job I just started. I signed on as a snowboarding instructor at Mount Snow's Perfect Turn Program (you know, just in case this kasina thing doesn't work out). Two things I would like to share that are helping me be a better coach:

1. Strength ID and Enhance - these four words were beat into us by our trainers - over and over again. It basically means, no matter how bad your student is doing, find what their asset is and work from there.

A student who is screaming like a banshee while plowing straight down the bunny hill
- You're doing an awesome job of keeping your board straight. Let's go diagonally across the mountain and work on some traverses so you can feel the edges this time.

A dancer who swings his hips like Elvis on crack to make a turn
- You do a great job of initiating your turns with your hips. Let's enhance that by cutting the hip speed by half. Also, you can try moving the front knee with your hips to have even more fun.

Strength ID and Enhance over and over again. I thought of this as a pragmatic, rapid fire way to apply the Marcus Buckingham First, Break All the Rules school of thought.

Try it sometime. It's hard to do. You also have to fight all the old urges to yell or scold your team members (You did what with that call?!? That marketing piece was missing THAT?!?!). What's more, unlike many of the training programs we observed in our last study on sales training, focusing on strengths requires you to a) realize what the strengths of your team members are and b) individualize comments using specific, positive feedback.

2. Focus on Fun - As Dan Pink has so eloquently written in A Whole New Mind (one of my Book Club picks), work is the new play and those who are really good at playing tend to be good at working. I'd like to challenge the idea of "Job Training" and refocus on "Play Training". To illustrate, if you listen to the best instructors here is a sampling of what they say:

- Try X this time. See if that is more fun for you. If not, we'll try something else.
- Are you hurt? Are you smiling? OK, then we are snowboarding!
- OK. Less talk, more playing.
- This run, I'd like you to work on your smile. Not nearly enough smiling going on.
- Go play.

To some degree, I know all this may sound hokey, but consider this: If it works when we are getting people to strap a sliding piece of wood and fiberglass to their feet for the first time and pay for it, then imagine if we did this for people who are already trained and experienced for the function we pay them to do!

If you want to test this some time, drop me a line. I would be happy to give anyone from the industry a Learn-to-Ride lesson if they want to meet me in Vermont. We'll go play.

Managing Transitions Within Your Organization

by Lee

At kasina, we do weekly book reports where a member of the team can share a book that they've read with the team. For my most recent report, we discussed "Managing Transitions: Making the Most of Change" by William Bridges. Among the many interesting points that the author made was the distinction between "change" and "transition." Change is situational while transition is psychological, and most firms fail to effectively manage transitions.

Some common situations that I have seen at asset management firms illustrate the importance of effectively managing transitions:

A new corporate brand was announced, but the firm's marketing efforts have not changed because the team has not let go of the old brand identity that they have worked with for years

Hybrid wholesalers were introduced into half of the firm's territories, but the external and internal wholesalers lack a clear vision for how to work with the hybrids in the new environment

The National Accounts team has been tasked with taking a more strategic role in the firm's distribution efforts, but despite organizational changes everyone continues to operate exactly as they had before

Firms should take several steps to avoid these types of situations, including identifying who is losing what due to the change, ignoring rationalizations to avoid communication (e.g. "They don't need to know yet. We'll tell them when the time comes. It'll just upset them now."), and creating temporary systems to manage the "neutral zone" that occurs during a transition.

For a brief recap of the book's concepts, you can download my presentation.

    
Posted by Lee Kowarski at 1:33 PM Permalink Comments (0)

November 8, 2006

Marketing to RIAs

by Lauren

We recently released a study regarding distribution to the RIA market, Independent Thinking: Winning in the RIA Market. Given all the press about their growing numbers and assets, 70 percent of interviewed firms are trying to figure out how to garner a greater share of this advisor segment.

The problem is that most firms today treat RIAs just like any other advisor group. For example, RIA marketing today typically relies upon the same materials and types of media that firms are using across advisor segments, with no customization or acknowledgement of RIAs specifically.

If asset managers understand that RIAs are different and a present unique opportunity, they should start treating them that way. For example, firms should consider:

• Attending RIA conferences
• Creating RIA Web sites
• Putting an RIA-focused spin on existing marketing materials

This is just the start of what firms need to do to better service RIAs through marketing. The point is, though, that until firms starting acknowledging RIAs as a key advisor segment, they will continue to wonder about the opportunity.

    
Posted by Lauren at 1:56 PM Permalink Comments (0)

September 6, 2006

Vote for Dave!

As I posted on my personal blog a few weeks ago, a friend/client of mine, Dave McCalley, is a great musician and is in a band along with some co-workers that has been named as a finalist for the Fortune Battle of the Corporate Bands. You may have seen an article about them today in Ignites. I am sure that they would appreciate your vote for Fans' Choice by visiting http://money.cnn.com/sales/fanschoice. They are band #6 - Soul Focus - and you can hear their music there. The "Chrysler Fans' Choice Award" will be announced at the finals October 6 and 7 at Cleveland's Rock 'n' Roll Hall of Fame.

    
Posted by Lee Kowarski at 9:20 AM Permalink Comments (0)

September 6, 2006

SRI is becoming mainstream

By Steven Miyao

The investment community is starting to get on board with SRI. Last week, an agreement was reached in the California state legislature that imposes the most sweeping controls on carbon dioxide emissions in the the country. It has been strongly supported by many venture capitalists from Silicon Valley. They are saying the measure will create new industries and new jobs. This is why SRI is becoming mainstream. SRI is going to make some people a lot of money.

There are only about 5 out of 3000 hedge funds that have a SRI investment philosphy. Hedge funds are a necessary component to further influence companies' social conscience. Only when companies' stocks are going to get shorted will firms really feel the pressure. SRI investing will be one of the major drivers in changing our business culture.

Business Week recently showcased the trend towards green investing. It's worth a read, but here's a paragraph that sums it up.

You know a cultural movement is real when the money men get on board. In just the past year a broad swath of financiers -- venture capitalists, hedge funds, investment banks, public pension funds, and even stodgy insurers -- have begun sinking billions of dollars into producers of ethanol, fuel cell superbatteries, microscopic bugs that turn glucose into plastic, environmentally friendly pesticides, anything that might tap into the green craze. Saving the planet, protecting America, doing God's work, cynically exploiting a feel-good trend -- call it what you will. Wall Street sees money to be made. When John V. Veech, a managing director at Lehman Brothers Inc. (LEH ), showed up at a renewable energy conference in June, he was amazed to see that it was standing room only. "If you went five years ago you'd see a lot of ponytails," he says. "Now these conferences are packed with suits."

    
Posted by Steven Miyao at 8:59 AM Permalink Comments (0)

August 22, 2006

Competitive Advantage

By Steven Miyao

Who has a competitive advantage in the asset management industry? What outside of superior product can give an asset manager a competitive advantage?

The August 21 issue of BusinessWeek has a number of interesting articles on "competition." Specifically, the article on competitive advantage talks about five guidelines for creating competitive advantage, three of which are very relevant for our industry:

1. Don't Just Get Bigger, Get Unique
There are so many "me, too" fund families in the industry that most advisors can't tell the difference between them. How are Columbia, J.P. Morgan, Morgan Stanley, OppenheimerFunds, Federated and T. Rowe different from Fidelity? Only very few of the large players have a much differentiated story to tell. Vanguard is a good example for being unique starting from the shareholder owned fund structure to its focus on low cost. After all, who really wants to sell a common, ordinary, everyday, me-too product? More importantly, who wants to buy one?

2. Why Compete? Create New Markets
"Niches are nice, but inventing a new market is whole lot better." The article rightly touches upon Cirque du Soleil as a benchmark business that created a new market with no significant direct competitors. Rydex is an example of this in the asset management space. The firm created inverse and leveraged funds and has been able to launch an entirely fund family with these new products as its core.

3. Obsess about Customers, Not Rivals
There is a lot behind this simple and often overused statement. The by-product of focusing on meeting/exceeding customer needs/wants is the creation of a competitive advantage, while the by-product of mimicking competitors is the creation of a competitive disadvantage. Whole Foods Market and The Container Store all obsess over its customers more than it rivals and success has followed. VK Consulting, Van Kampen's value added services group, serves as a good example for that in our industry. The firm continues to go beyond what its competitors have done in focusing on the business developing needs of its financial advisors.

    
Posted by Steven Miyao at 5:12 PM Permalink Comments (0)

August 7, 2006

Asset Management to the NFL: Hiring Smart

by Mike McLaughlin

It's a logical career path: asset management to the National Football League (NFL). Ok, not really.

With NFL Commissioner Paul Tagliabue ready to resign after 16 wildly successful years, the search is on for his replacement. As it turns out, one of the five finalists is Fidelity Investments COO Robert L. Reynolds. Though Mr. Reynolds was a college football referee for a number of years, his potential leap from Fidelity to the NFL is far from obvious at first glance.

The consideration of Reynolds is just the latest in a sequence of interesting, alternative-looking hires in the world of sports. For example:

• The Minnesota Wild hired a former beat writer as Director of Hockey Operations.
• The New York Islanders promoted retiring goalie Garth Snow to General Manager.
• The Texas Rangers and Boston Red Sox hired Jon Daniels and Theo Epstein, respectively, as General Managers when both were just 28 years old.

What makes these moves intriguing is that they go against the grain of traditional thinking. These organizations overlooked age, experience, and other primary factors in the search for the best candidates. Given the stakes involved in hiring new people, these are bold moves.

The news about Mr. Reynolds and the NFL made me reflect on the hiring practices of asset management firms. Like most others, our industry is incestuous when it comes to finding talent. It's easier to hire the guy with experience from the firm next door than take a chance. We at kasina are constantly asked by our clients if we have leads on people from other firms who might be interested in switching teams.

Too often the problem is that firms end up ignoring the vast pool of talent beyond the industry's borders. Certainly asset management has no monopoly on great people. As firms continue to remake themselves in an increasingly competitive environment, the industry will likely need to be more creative in the way it identifies the individuals it brings into the fold.

We are starting to see some changes.

• The marketing teams at several firms purposely focused outside the industry for recent strategic hires, including people whose backgrounds are in diverse businesses such as consumer products and online retailing.
• Recent college grads are becoming more of a strategic hire at a few kasina clients, infiltrating wholesaling teams and other critical functions.

While these are steps in the right direction, there is plenty of room for creative growth when it comes to finding talent. As with Commissioners in the NFL, the best wholesalers and marketers of tomorrow may be people without an ounce of direct experience but who instead have the intellectual and operational skills to make things happen. Such an open-minded approach to unearthing new hires can be a differentiator to helping firms separate themselves from the industry pack.

    
Posted at 10:35 AM Permalink Comments (0)

July 14, 2006

Taking the Time to Prioritize

by Lee

Most companies do a poor job prioritizing - largely because they either haven't thought about how to do so effectively or haven't taken the time.

We wrote about various prioritization approaches in a recent Industry Analysis brief, and there are many that can help, but a favorite of mine is the strategy offsite. We have our semi-annual strategy offsite coming up next week at kasina, and these sessions, which we began shortly after starting the firm, provide our team with a chance to step back, review our progress, and re-evaluate our priorities as an organization. They have proven invaluable in keeping everyone on the same page.

Despite the immense value that I have seen in taking the time away from the daily grind to set strategy, I find that that most of our clients do not have mechanisms in place to do so. It is easy for priorities to get muddled when they are tackled on a one-off basis, and I encourage every firm to:

1) Schedule at least an annual, if not a more frequent, session to set the strategy
2) Do these sessions offsite somewhere (depending on the size of the team, you can even use a team member's back yard)
3) For the day (or days) that you are there, be there - no cell phones, BlackBerrys, etc...
4) Plan lots of breaks (these sessions are exhausting)
5) Have fun - it shouldn't be all about setting strategy - it is important for team building as well

    
Posted by Lee Kowarski at 2:35 PM Permalink Comments (0)

June 28, 2006

Enabling innovation: Brainstorming

by Lauren

The business world is buzzing about the word innovation. CEOs rank innovative thinking as one of the most important elements to remaining competitive, but also find it to be the biggest challenge to find it and cultivate it within employees.

One of the biggest problems with innovation today though is not that people do not understand the concept, but that corporate culture often hinders it. The very CEOs who are struggling to encourage people to be innovative are unaware that their companies may not be appropriately designed to breed innovation. For example, if the only way a manager will listen to an employee idea is if they bring them a formalized proposal, the number of potential ideas is already hindered. Creativity does not have to be a group process, but forcing it into a box can compromise actual, actionable innovation. Particularly within our traditional industry, acting upon new Sales and Marketing ideas is often difficult.

Innovative thinking often starts with a brainstorming process. The idea should be to throw things out there and eventually see what sticks, not to force each idea to be sticky in and of itself. Ideo, www.ideo.com, a leading innovation consulting firm suggests creating at least 100 ideas in a 60 minute group brainstorming session. Crazy ideas are encouraged, as they often yield the best usable ideas in the end.

With an appropriately defined end goal, employees should be able to think freely during the brainstorming process; cutting down ideas to the best and most reasonable comes later.

Here at kasina, we have tried and are always trying new ways to foster innovation and brainstorming ourselves. Beyond the brainstorming process itself, just two ideas that we are currently trying include:

A quarterly innovation think tank group: Small teams of 3-4 people work together to identify an issue and develop a solution.

A company ideas board: To foster sharing and collaboration on brainstorming.

What can you do with your team to create more ideas?

    
Posted by Lauren at 3:30 PM Permalink Comments (0)

May 19, 2006

The Need for Innovation in Education

by Lee

The Libertarian Party's blog recently had a post in response to a NY Times editorial (subscription required) concerning an effort by Wisconsin's largest teachers' union to put a stop to innovation in education. The union aimed to close a charter school that offers all of its courses online (a case that luckily did not hold up in court).

The editorial and response both shed light on a disturbing trend: the fear of innovation in our educational system. This issue is one that is close to our hearts at kasina, as we started the kasina Youth Foundation as an organization dedicated to innovating and improving the education of our children. In the next ten years, we hope to:

Help 10,000 disadvantaged children fall in love with learning

Engage 1,000 corporate volunteers to get involved with education beyond fundraising

We are currently looking to select additional partners for the Foundation, and would welcome any suggestions you have for innovative organizations we should consider.

    
Posted by Lee Kowarski at 3:35 PM Permalink Comments (0)

May 16, 2006

Long-term Project Motivation

By Conrad
In working with some of our clients and in my previous job I discovered a motivation curve experienced during long-term projects on the client site. It goes a little something like this: lots of excitement and motivation in the beginning; sluggish to nearly motionless in the middle; and then a quick pick up at the end in time to meet deadlines and complete the project. This end bit usually requires a sizeable amount of scrambling, the goal becoming less about perfection and more about just getting it all done in time.

This lack of consistent motivation on long projects is nothing new and finding ways to help fend it off is always tricky.

Some suggestions for maintaining enthusiasm...

- Set smaller milestones beyond those included in the project timeline. More importantly, get into the habit of celebrating each one that is met by treating yourself or taking your team out for a celebration. Making time for this type of reward should help to refocus and keep up motivation.

- Bring in a new team member for a specific task in the middle of the project. That person's fresh energy will likely help to get you motivated once again and in all likelihood revitalize the project.

- Always have a support team in place to give an outside perspective at regular intervals during the project, including when it nears the end. Too much time spent looking at the same information tends to narrow one's outlook, disguise mistakes, and obscure alternative solutions.

Though only a start, these steps may help to rescue a long-term project by preserving your motivation. As an added bonus, you maintain some of your drive and excitement, leading to a more positive experience in the workplace.

    
Posted by Conrad Bakker at 2:41 PM Permalink Comments (0)

May 5, 2006

The Importance of Team Nights Out

by Lee

Last night, the kasina team did our monthly Team Night Out. The group (partially shown below) went for Korean BBQ at Chung Moo Ro.

The fun time had by all (see photo below) reminded me of how important these events are for the team. It is a great opportunity for everyone to unwind and connect outside of the office, and for our families to join us as part of the kasina community. This is an important aspect of our culture, and something that I think most teams don't do nearly enough of. Your team is so critical to your success. When discussing kasina's hiring process, a client asked me earlier this week if we were "hiring someone or marrying them." With the amount of hours you spend with your team, is there really that big a difference? :-)

    
Posted by Lee Kowarski at 3:02 PM Permalink Comments (1)

April 28, 2006

Hybrid autos - Do not price like this

By Mike Ma

I am on vacation in California, where we have been driving between San Francisco, Tahoe, and the Wine Country--a lot of miles, and Hertz was kind enough to give me a gas guzzling Buick. With all the brouhaha about hybrids(being the car, not the wholesaler). I went "Windows shopping" on CarsDirect, and here is what I found.

Does something seem wrong to you here? Isn't one of ideas behind hybrids (not the only of course) is to SAVE you money. But here is the truth:

1. The tax benefit is not as good as you may think, especially those susceptible to AMT. I am going to go out on a limb and say that the marketing demographic for hybrids is likely to have AMT liability.

2. Manufacturers are lying. For instance, this MSN Money article points out that the Chevy Silverado Hybrid and the GMC Sierra each get only ONE mile per gallon more efficiency than their gas counterparts. And even the good eggs such as the Prius really get nowhere near the touted 60mpg.

So we are left with the gas savings to help us justify a $14,528 premium. A quick calculation at MixedPower shows us this (I used 30mpg as the average EPA on the conventional Accord, from its own stats):

It would take about 116+ years at $3/gallon and 12,000 miles/year?!?!? You may disagree with the exact assumptions, but almost anyway you slice it, it doesn't save you money to get a hybrid.

Why do the auto makers do it ... because for the time being they can (for now). They are pricing their products at antithetical ends of their intent. It also implies that they don't really care about the environment or rising fuel costs, they care about capitalizing short-term profits. But someone will figure out that this is a pennywise, poundfoolish strategy and create an economical, available, atuentic hybrid that will speak to car buyers everywhere.

Do a hyopthetical, mental "find and replace" ... automaker--> fund company, car --> mutual fund, car buyer --> shareholder, etc. and see what implications there are for your own product development and fee structures.

    
Posted by Mike Ma at 3:20 AM Permalink Comments (0)

April 18, 2006

kasina Foundation is a legal 501(c)(3).

By Steven

We started our foundation one year and a half ago. Today we finally got the approval from the IRS for our 501(c)(3) status.

The kasina foundation is a non-profit organization dedicated to innovating and improving the education of our children. In the next ten years, we hope to:

- Help 10,000 disadvantaged children fall in love with learning
- Engage 1,000 corporate volunteers to get involved with education beyond fundraising

    
Posted by Steven Miyao at 4:06 PM Permalink Comments (0)